Earlier this month, the FBI’s National Instant Criminal Background Check System, or NICS, revealed that firearm background checks in May fell by nearly 13% relative to the previous month, which put significant weight on the stock performance of most publicly-traded gun makers. The Federal Bureau of Investigation reported 1.87 million background checks in May, as compared to 2.15 million recorded in April. The May figure was significantly below the range of $2.5 million to $2.6 million registered in each month of the first quarter of 2016. However, one should keep in mind that NICS is only used to determine whether a prospective buyer is eligible to buy firearms, so FBI’s data does not represent the actual number of firearms sold. Although May did not reach the 2 million level, 2016 remains on track to being a record breaking year for background checks. With that in mind, let’s have a look at what the hedge funds tracked by Insider Monkey think of firearms stocks by examining the hedge fund sentiment towards five such stocks.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
#5. ARC Group WorldWide Inc. (NASDAQ:ARCW)
– Investors with long positions as of March 31: 3
– Aggregate value of investors’ holdings as of March 31: $3.25 Million
There were a mere three hedge funds monitored by Insider Monkey with long positions in ARC Group WorldWide Inc. (NASDAQ:ARCW) at the end of the March quarter, as compared to two funds at the end of the December quarter. The aggregate value of those positions rose to $3.25 million from $1.99 million. The three funds invested in ARC Group stockpiled nearly 7% of the company’s outstanding shares. While ARC Group is not necessarily a gun maker, the company provides complex, precision, net-shape metal components to companies in numerous industries including firearms and defense. The advanced manufacturer has seen its shares gain 40% since the beginning of 2016. ARC Group’s sales for the three months that ended March 27 were $26.5 million, down from $27.9 million recorded for the same period of the prior year. First Eagle Investment Management, overseen by President and CEO Mehdi Mahmud, owns 1.15 million shares of ARC Group WorldWide Inc. (NASDAQ:ARCW) as of the end of the first quarter.