Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards ArcelorMittal (NYSE:MT) to find out whether there were any major changes in hedge funds’ views.
Is MT a good stock to buy now? ArcelorMittal (NYSE:MT) has seen an increase in support from the world’s most elite money managers of late. ArcelorMittal (NYSE:MT) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. There were 19 hedge funds in our database with MT positions at the end of the second quarter. Our calculations also showed that MT isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s analyze the key hedge fund action surrounding ArcelorMittal (NYSE:MT).
Do Hedge Funds Think MT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MT over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in ArcelorMittal (NYSE:MT). Renaissance Technologies has a $107 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $55.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Dmitry Balyasny’s Balyasny Asset Management and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to ArcelorMittal (NYSE:MT), around 4.01% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, dishing out 1.09 percent of its 13F equity portfolio to MT.
As aggregate interest increased, key money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, established the largest position in ArcelorMittal (NYSE:MT). Point72 Asset Management had $17.8 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also initiated a $14.6 million position during the quarter. The other funds with brand new MT positions are Todd J. Kantor’s Encompass Capital Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ron Gutfleish’s Elm Ridge Capital.
Let’s now take a look at hedge fund activity in other stocks similar to ArcelorMittal (NYSE:MT). These stocks are Bilibili Inc. (NASDAQ:BILI), Masco Corporation (NYSE:MAS), Livongo Health, Inc. (NASDAQ:LVGO), Pioneer Natural Resources Company (NYSE:PXD), HEICO Corporation (NYSE:HEI), Catalent Inc (NYSE:CTLT), and Brookfield Infrastructure Partners L.P. (NYSE:BIP). All of these stocks’ market caps match MT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $722 million. That figure was $310 million in MT’s case. Livongo Health, Inc. (NASDAQ:LVGO) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 13 bullish hedge fund positions. ArcelorMittal (NYSE:MT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MT is 38.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on MT as the stock returned 59.8% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.