Is Howmet Aerospace (HWM) Stock A Buy or Sell?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Howmet Aerospace Inc. (NYSE:HWM).

Is Howmet Aerospace (HWM) stock a buy or sell? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets inched up by 14 in recent months. Howmet Aerospace Inc. (NYSE:HWM) was in 49 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HWM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here).


Paul Singer of Elliott Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). Now we’re going to view the new hedge fund action surrounding Howmet Aerospace Inc. (NYSE:HWM).

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

At the end of December, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HWM over the last 22 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is HWM A Good Stock To Buy?

Among these funds, Elliott Investment Management held the most valuable stake in Howmet Aerospace Inc. (NYSE:HWM), which was worth $1186.3 million at the end of the fourth quarter. On the second spot was Orbis Investment Management which amassed $805 million worth of shares. Kensico Capital, First Pacific Advisors LLC, and Lone Pine 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 Elliott Investment Management allocated the biggest weight to Howmet Aerospace Inc. (NYSE:HWM), around 11.57% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, designating 7.28 percent of its 13F equity portfolio to HWM.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Egerton Capital Limited, managed by John Armitage, created the most valuable position in Howmet Aerospace Inc. (NYSE:HWM). Egerton Capital Limited had $113.3 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $42.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Javier Velazquez’s Albar Capital, and Michael Cowley’s Sandbar Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Howmet Aerospace Inc. (NYSE:HWM) but similarly valued. We will take a look at Loews Corporation (NYSE:L), Opendoor Technologies Inc. (NASDAQ:OPEN), Jack Henry & Associates, Inc. (NASDAQ:JKHY), GSX Techedu Inc. (NYSE:GSX), NortonLifeLock Inc. (NASDAQ:NLOK), Bio-Techne Corporation (NASDAQ:TECH), and Dynatrace, Inc. (NYSE:DT). This group of stocks’ market caps match HWM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
L 19 174655 1
OPEN 28 1024602 28
JKHY 28 411775 -2
GSX 17 235770 -1
NLOK 29 1000796 -5
TECH 24 301777 -6
DT 53 2023929 7
Average 28.3 739043 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $4092 million in HWM’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 17 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 84.4. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on HWM as the stock returned 11.5% since the end of Q4 (through 3/19) 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.