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Hedge Funds Dipping Their Toes Back Into Howmet Aerospace Inc. (HWM)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Howmet Aerospace Inc. (NYSE:HWM) and determine whether the smart money was really smart about this stock.

Howmet Aerospace Inc. (NYSE:HWM) has experienced an increase in enthusiasm from smart money recently. Howmet Aerospace Inc. (NYSE:HWM) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 46. There were 25 hedge funds in our database with HWM positions at the end of the first quarter. Our calculations also showed that HWM isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Singer ELLIOTT MANAGEMENT

Paul Singer of Elliott Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s review the latest hedge fund action regarding Howmet Aerospace Inc. (NYSE:HWM).

How have hedgies been trading Howmet Aerospace Inc. (NYSE:HWM)?

At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 42 hedge funds with a bullish position in HWM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Howmet Aerospace Inc. (NYSE:HWM) was held by Elliott Investment Management, which reported holding $658.8 million worth of stock at the end of September. It was followed by Orbis Investment Management with a $589.9 million position. Other investors bullish on the company included First Pacific Advisors LLC, Kensico Capital, and Lone Pine Capital. In terms of the portfolio weights assigned to each position Elliott Investment Management allocated the biggest weight to Howmet Aerospace Inc. (NYSE:HWM), around 7.17% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, earmarking 4.44 percent of its 13F equity portfolio to HWM.

Consequently, key hedge funds have jumped into Howmet Aerospace Inc. (NYSE:HWM) headfirst. Elliott Investment Management, managed by Paul Singer, initiated the most valuable position in Howmet Aerospace Inc. (NYSE:HWM). Elliott Investment Management had $658.8 million invested in the company at the end of the quarter. Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC also made a $204.1 million investment in the stock during the quarter. The other funds with brand new HWM positions are Michael Lowenstein’s Kensico Capital, Lone Pine Capital, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to Howmet Aerospace Inc. (NYSE:HWM). We will take a look at Solaredge Technologies Inc (NASDAQ:SEDG), Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), Westlake Chemical Corporation (NYSE:WLK), Cabot Oil & Gas Corporation (NYSE:COG), Algonquin Power & Utilities Corp. (NYSE:AQN), Watsco Inc (NYSE:WSO), and Hubbell Incorporated (NYSE:HUBB). This group of stocks’ market valuations are similar to HWM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SEDG 25 435719 -2
SQM 14 91324 4
WLK 29 165262 9
COG 31 237488 -6
AQN 13 283894 -1
WSO 21 229597 1
HUBB 29 335298 14
Average 23.1 254083 2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $2361 million in HWM’s case. Cabot Oil & Gas Corporation (NYSE:COG) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 13 bullish hedge fund positions. Howmet Aerospace Inc. (NYSE:HWM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HWM is 76.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on HWM as the stock returned 16% during Q3 (through September 14th) 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.