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Hedge Funds Are Dumping ArcBest Corp (ARCB)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtArcBest Corp (NASDAQ:ARCB) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is ArcBest Corp (NASDAQ:ARCB) undervalued? Prominent investors were taking a pessimistic view. The number of long hedge fund positions retreated by 2 recently. Our calculations also showed that ARCB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action regarding ArcBest Corp (NASDAQ:ARCB).

What does smart money think about ArcBest Corp (NASDAQ:ARCB)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARCB over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ARCB A Good Stock To Buy?

The largest stake in ArcBest Corp (NASDAQ:ARCB) was held by Royce & Associates, which reported holding $8.9 million worth of stock at the end of September. It was followed by Scopus Asset Management with a $7.7 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Scopus Asset Management allocated the biggest weight to ArcBest Corp (NASDAQ:ARCB), around 0.66% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to ARCB.

Since ArcBest Corp (NASDAQ:ARCB) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who were dropping their full holdings heading into Q4. Intriguingly, Michael Gelband’s ExodusPoint Capital dumped the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $0.5 million in stock. Mika Toikka’s fund, AlphaCrest Capital Management, also cut its stock, about $0.5 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to ArcBest Corp (NASDAQ:ARCB). These stocks are RPC, Inc. (NYSE:RES), Provention Bio, Inc. (NASDAQ:PRVB), National Energy Services Reunited Corp. (NASDAQ:NESR), and China Yuchai International Limited (NYSE:CYD). This group of stocks’ market valuations are closest to ARCB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RES 11 14862 -2
PRVB 8 38816 -1
NESR 5 17598 -3
CYD 6 50209 0
Average 7.5 30371 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $42 million in ARCB’s case. RPC, Inc. (NYSE:RES) is the most popular stock in this table. On the other hand National Energy Services Reunited Corp. (NASDAQ:NESR) is the least popular one with only 5 bullish hedge fund positions. ArcBest Corp (NASDAQ:ARCB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ARCB as the stock returned 51.9% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.