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Hedge Funds Were Buying Arconic Inc. (ARNC) Before The Coronavirus

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Arconic Inc. (NYSE:ARNC).

Arconic Inc. (NYSE:ARNC) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Our calculations also showed that ARNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

At the moment there are numerous formulas investors use to value publicly traded companies. Two of the less known formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outpace the market by a superb margin (see the details here).

Paul Singer ELLIOTT MANAGEMENT

Paul Singer of Elliott Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the key hedge fund action encompassing Arconic Inc. (NYSE:ARNC).

How are hedge funds trading Arconic Inc. (NYSE:ARNC)?

At Q4’s end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the third quarter of 2019. On the other hand, there were a total of 46 hedge funds with a bullish position in ARNC a year ago. So, let’s check out 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 Inc. (NYSE:ARNC), which was worth $1279 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $699 million worth of shares. Kensico Capital, Orbis Investment Management, 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 Inc. (NYSE:ARNC), around 10.81% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, setting aside 7.97 percent of its 13F equity portfolio to ARNC.

Consequently, key money managers were leading the bulls’ herd. Alyeska Investment Group, managed by Anand Parekh, initiated the most valuable position in Arconic Inc. (NYSE:ARNC). Alyeska Investment Group had $32.2 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $22.5 million position during the quarter. The following funds were also among the new ARNC investors: Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, David Harding’s Winton Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Arconic Inc. (NYSE:ARNC) but similarly valued. We will take a look at Host Hotels and Resorts Inc (NYSE:HST), Wheaton Precious Metals Corp. (NYSE:WPM), DocuSign, Inc. (NASDAQ:DOCU), and Expeditors International of Washington (NASDAQ:EXPD). All of these stocks’ market caps are similar to ARNC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HST 27 409585 -3
WPM 30 476804 1
DOCU 33 905820 5
EXPD 27 290323 -3
Average 29.25 520633 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $521 million. That figure was $3678 million in ARNC’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NYSE:HST) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Arconic Inc. (NYSE:ARNC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately ARNC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ARNC were disappointed as the stock returned -43.3% during the first two and a half months of 2020 (through March 16th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.

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

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