How Did Hedge Funds’ Arch Resources, Inc. (ARCH) Bets Fare?

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 867 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 September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Arch Resources, Inc. (NYSE:ARCH) and determine whether the smart money was really smart about this stock.

Is Arch Resources, Inc. (NYSE:ARCH) a safe investment right now? Money managers were becoming more confident. The number of bullish hedge fund bets went up by 3 lately. Arch Resources, Inc. (NYSE:ARCH) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 42. Our calculations also showed that ARCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 28 hedge funds in our database with ARCH positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Arch Resources, Inc. (NYSE:ARCH).

Do Hedge Funds Think ARCH Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARCH over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jon Bauer’s Contrarian Capital has the biggest position in Arch Resources, Inc. (NYSE:ARCH), worth close to $66.2 million, corresponding to 11.8% of its total 13F portfolio. The second largest stake is held by Len Kipp and Xavier Majic of Maple Rock Capital, with a $65.1 million position; the fund has 9.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Stephen Mildenhall’s Contrarius Investment Management, Jonathan Barrett and Paul Segal’s Luminus Management and Charles Paquelet’s Skylands Capital. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Arch Resources, Inc. (NYSE:ARCH), around 11.85% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, designating 11.55 percent of its 13F equity portfolio to ARCH.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Contrarius Investment Management, managed by Stephen Mildenhall, created the largest position in Arch Resources, Inc. (NYSE:ARCH). Contrarius Investment Management had $62 million invested in the company at the end of the quarter. Wayne Cooperman’s Cobalt Capital Management also made a $11.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Robert Bishop’s Impala Asset Management, and William Harnisch’s Peconic Partners LLC.

Let’s now take a look at hedge fund activity in other stocks similar to Arch Resources, Inc. (NYSE:ARCH). We will take a look at Supernus Pharmaceuticals Inc (NASDAQ:SUPN), Golden Entertainment Inc (NASDAQ:GDEN), Northern Oil & Gas, Inc. (NYSE:NOG), Weis Markets, Inc. (NYSE:WMK), Lordstown Motors Corp. (NASDAQ:RIDE), Big Lots, Inc. (NYSE:BIG), and Eldorado Gold Corp (NYSE:EGO). This group of stocks’ market values are similar to ARCH’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $468 million in ARCH’s case. Golden Entertainment Inc (NASDAQ:GDEN) is the most popular stock in this table. On the other hand Lordstown Motors Corp. (NASDAQ:RIDE) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Arch Resources, Inc. (NYSE:ARCH) is more popular among hedge funds. Our overall hedge fund sentiment score for ARCH is 80.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on ARCH as the stock returned 2.4% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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