We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Arrow Financial Corporation (NASDAQ:AROW).
Arrow Financial Corporation (NASDAQ:AROW) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of September. Our calculations also showed that AROW 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as BioSpecifics Technologies Corp. (NASDAQ:BSTC), Xenon Pharmaceuticals Inc (NASDAQ:XENE), and Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are perceived as underperforming, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our researchers hone in on the aristocrats of this group, about 850 funds. These hedge fund managers have their hands on the majority of the hedge fund industry’s total capital, and by watching their matchless equity investments, Insider Monkey has determined various investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. 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. With all of this in mind we’re going to check out the recent hedge fund action regarding Arrow Financial Corporation (NASDAQ:AROW).
What does smart money think about Arrow Financial Corporation (NASDAQ:AROW)?
At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AROW over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Arrow Financial Corporation (NASDAQ:AROW). Renaissance Technologies has a $9.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Winton Capital Management, led by David Harding, holding a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Arrow Financial Corporation (NASDAQ:AROW), around 0.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to AROW.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to Arrow Financial Corporation (NASDAQ:AROW). These stocks are BioSpecifics Technologies Corp. (NASDAQ:BSTC), Xenon Pharmaceuticals Inc (NASDAQ:XENE), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), Resolute Forest Products Inc (NYSE:RFP), Chuy’s Holdings Inc (NASDAQ:CHUY), Athersys, Inc. (NASDAQ:ATHX), and Immunic, Inc. (NASDAQ:IMUX). This group of stocks’ market values match AROW’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 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $11 million in AROW’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Athersys, Inc. (NASDAQ:ATHX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Arrow Financial Corporation (NASDAQ:AROW) is even less popular than ATHX. Our overall hedge fund sentiment score for AROW is 20. 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 AROW 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on AROW as the stock returned 19.2% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.