At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Aluminum Corp. of China Limited (NYSE:ACH).
Aluminum Corp. of China Limited (NYSE:ACH) investors should pay attention to a decrease in hedge fund sentiment lately. Aluminum Corp. of China Limited (NYSE:ACH) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. Our calculations also showed that ACH 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.
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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 10 most profitable companies in the world 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. Now we’re going to review the latest hedge fund action surrounding Aluminum Corp. of China Limited (NYSE:ACH).
What does smart money think about Aluminum Corp. of China Limited (NYSE:ACH)?
At third quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in ACH a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the biggest position in Aluminum Corp. of China Limited (NYSE:ACH), worth close to $2.4 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $1.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Paul Marshall and Ian Wace’s Marshall Wace LLP, and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Marshall Wace LLP allocated the biggest weight to Aluminum Corp. of China Limited (NYSE:ACH), around 0.0036% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0024 percent of its 13F equity portfolio to ACH.
Judging by the fact that Aluminum Corp. of China Limited (NYSE:ACH) has witnessed falling interest from hedge fund managers, we can see that there were a few hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $0.2 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Aluminum Corp. of China Limited (NYSE:ACH). We will take a look at Ares Management Corp (NYSE:ARES), Polaris Inc. (NYSE:PII), Stericycle Inc (NASDAQ:SRCL), Axon Enterprise, Inc. (NASDAQ:AAXN), Columbia Sportswear Company (NASDAQ:COLM), Cemex SAB de CV (NYSE:CX), and FirstService Corporation (TSE:FSV). This group of stocks’ market values match ACH’s market value.
|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 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $403 million. That figure was $4 million in ACH’s case. Polaris Inc. (NYSE:PII) is the most popular stock in this table. On the other hand FirstService Corporation (TSE:FSV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Aluminum Corp. of China Limited (NYSE:ACH) is even less popular than FSV. Our overall hedge fund sentiment score for ACH is 23. 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. Hedge funds clearly dropped the ball on ACH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ACH as the stock returned 78.3% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.