Hedge Funds Never Been Less Bullish On Arconic Corporation (ARNC)

In this article we will check out the progression of hedge fund sentiment towards Arconic Corporation (NYSE:ARNC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Arconic Corporation (NYSE:ARNC) was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. ARNC has experienced a decrease in hedge fund interest recently. There were 43 hedge funds in our database with ARNC positions at the end of the previous quarter. Our calculations also showed that ARNC 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.

To most traders, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading at the moment, Our researchers look at the leaders of this group, around 850 funds. Most estimates calculate that this group of people administer bulk of the smart money’s total capital, and by watching their best stock picks, Insider Monkey has spotted several investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Michael Price MFP Investors

Michael Price of MFP Investors

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to review the recent hedge fund action encompassing Arconic Corporation (NYSE:ARNC).

Hedge fund activity in Arconic Corporation (NYSE:ARNC)

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -42% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARNC over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Elliott Management held the most valuable stake in Arconic Corporation (NYSE:ARNC), which was worth $667.5 million at the end of the third quarter. On the second spot was Lone Pine Capital which amassed $331.8 million worth of shares. First Pacific Advisors LLC, Kensico Capital, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Elliott Management allocated the biggest weight to Arconic Corporation (NYSE:ARNC), around 12.37% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, dishing out 5.31 percent of its 13F equity portfolio to ARNC.

Due to the fact that Arconic Corporation (NYSE:ARNC) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of money managers who sold off their entire stakes in the first quarter. Interestingly, William B. Gray’s Orbis Investment Management dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $376.4 million in stock. Joshua Friedman and Mitchell Julis’s fund, Canyon Capital Advisors, also cut its stock, about $115.2 million worth. These moves are interesting, as aggregate hedge fund interest fell by 18 funds in the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Arconic Corporation (NYSE:ARNC) but similarly valued. These stocks are Carlisle Companies, Inc. (NYSE:CSL), American Homes 4 Rent (NYSE:AMH), SEI Investments Company (NASDAQ:SEIC), and The Toro Company (NYSE:TTC). This group of stocks’ market caps match ARNC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSL 23 262658 -3
AMH 21 177852 -2
SEIC 33 254738 4
TTC 24 675646 1
Average 25.25 342724 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $343 million. That figure was $1740 million in ARNC’s case. SEI Investments Company (NASDAQ:SEIC) is the most popular stock in this table. On the other hand American Homes 4 Rent (NYSE:AMH) is the least popular one with only 21 bullish hedge fund positions. Arconic Corporation (NYSE:ARNC) is not the least popular stock in this group but hedge fund interest is still below 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on ARNC as the stock returned 142.2% during the second quarter and outperformed the market by an even larger margin.

Follow Howmet Aerospace Inc. (NYSE:HWM)

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