After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Arko Corp. (NASDAQ:ARKO).
Is ARKO a good stock to buy? Arko Corp. (NASDAQ:ARKO) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ARKO shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 13 hedge funds in our database with ARKO positions at the end of the fourth quarter. Our calculations also showed that ARKO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a glance at the new hedge fund action surrounding Arko Corp. (NASDAQ:ARKO).
Do Hedge Funds Think ARKO Is A Good Stock To Buy Now?
At first quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 62% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in ARKO a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Cannell Capital held the most valuable stake in Arko Corp. (NASDAQ:ARKO), which was worth $13.2 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $8.8 million worth of shares. Sphera Global Healthcare Fund, EJF Capital, and ExodusPoint Capital 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 Cannell Capital allocated the biggest weight to Arko Corp. (NASDAQ:ARKO), around 2.96% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, designating 0.94 percent of its 13F equity portfolio to ARKO.
Consequently, specific money managers have jumped into Arko Corp. (NASDAQ:ARKO) headfirst. Cannell Capital, managed by J. Carlo Cannell, assembled the most outsized position in Arko Corp. (NASDAQ:ARKO). Cannell Capital had $13.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $8.8 million position during the quarter. The following funds were also among the new ARKO investors: Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), Ken Griffin’s Citadel Investment Group, and Renaissance Technologies.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Arko Corp. (NASDAQ:ARKO) but similarly valued. We will take a look at Model N Inc (NYSE:MODN), Tompkins Financial Corporation (NYSE:TMP), US Concrete Inc (NASDAQ:USCR), Everi Holdings Inc (NYSE:EVRI), Northwest Biotherapeutics, Inc (NASDAQ:NWBO), German American Bancorp., Inc. (NASDAQ:GABC), and Employers Holdings, Inc. (NYSE:EIG). This group of stocks’ market caps are closest to ARKO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MODN | 13 | 71890 | -2 |
| TMP | 5 | 5727 | -1 |
| USCR | 6 | 45936 | -2 |
| EVRI | 24 | 217375 | -5 |
| NWBO | 1 | 1 | 1 |
| GABC | 3 | 21395 | 0 |
| EIG | 11 | 59482 | -2 |
| Average | 9 | 60258 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $44 million in ARKO’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand Northwest Biotherapeutics, Inc (NASDAQ:NWBO) is the least popular one with only 1 bullish hedge fund positions. Arko Corp. (NASDAQ:ARKO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARKO is 83.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately ARKO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ARKO were disappointed as the stock returned -16.4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.