We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ArcelorMittal (NYSE:MT) in this article.
ArcelorMittal (NYSE:MT) has seen an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that MT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the fresh hedge fund action regarding ArcelorMittal (NYSE:MT).
How are hedge funds trading ArcelorMittal (NYSE:MT)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MT over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ArcelorMittal (NYSE:MT) was held by Renaissance Technologies, which reported holding $133 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $54 million position. Other investors bullish on the company included Luminus Management, Arrowstreet Capital, and Scopus Asset Management. In terms of the portfolio weights assigned to each position GoldenTree Asset Management allocated the biggest weight to ArcelorMittal (NYSE:MT), around 2.54% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, dishing out 1.65 percent of its 13F equity portfolio to MT.
Now, specific money managers were breaking ground themselves. GoldenTree Asset Management, managed by Steven Tananbaum, initiated the most valuable position in ArcelorMittal (NYSE:MT). GoldenTree Asset Management had $17 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $12.9 million investment in the stock during the quarter. The following funds were also among the new MT investors: Robert Polak’s Anchor Bolt Capital, Robert Vincent McHugh’s Jade Capital Advisors, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ArcelorMittal (NYSE:MT) but similarly valued. We will take a look at Lennar Corporation (NYSE:LEN), Wausau Paper Corp. (NYSE:WPP), Citizens Financial Group Inc (NYSE:CFG), and Omnicom Group Inc. (NYSE:OMC). This group of stocks’ market caps are closest to MT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEN | 63 | 1861573 | 4 |
| WPP | 7 | 49982 | 4 |
| CFG | 42 | 1814103 | -1 |
| OMC | 22 | 480889 | -5 |
| Average | 33.5 | 1051637 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $1052 million. That figure was $353 million in MT’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Wausau Paper Corp. (NYSE:WPP) is the least popular one with only 7 bullish hedge fund positions. ArcelorMittal (NYSE:MT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately MT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MT investors were disappointed as the stock returned -54.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
