In this article we are going to use hedge fund sentiment as a tool and determine whether Howmet Aerospace Inc. (NYSE:HWM) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Howmet Aerospace Inc. (NYSE:HWM) going to take off soon? Money managers were getting more bullish. The number of bullish hedge fund positions went up by 2 lately. Howmet Aerospace Inc. (NYSE:HWM) was in 51 hedge funds’ portfolios at the end of March. The all time high for this statistic was 49. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HWM isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Singer of Elliott Management
At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Keeping this in mind let’s take a glance at the recent hedge fund action regarding Howmet Aerospace Inc. (NYSE:HWM).
Do Hedge Funds Think HWM Is A Good Stock To Buy Now?
At the end of March, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HWM over the last 23 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.
The largest stake in Howmet Aerospace Inc. (NYSE:HWM) was held by Elliott Investment Management, which reported holding $1335.5 million worth of stock at the end of December. It was followed by Orbis Investment Management with a $813.6 million position. Other investors bullish on the company included Kensico Capital, First Pacific Advisors LLC, and Steadfast Capital Management. In terms of the portfolio weights assigned to each position Elliott Investment Management allocated the biggest weight to Howmet Aerospace Inc. (NYSE:HWM), around 9.93% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, dishing out 9.73 percent of its 13F equity portfolio to HWM.
As industrywide interest jumped, key hedge funds have jumped into Howmet Aerospace Inc. (NYSE:HWM) headfirst. Junto Capital Management, managed by James Parsons, initiated the largest position in Howmet Aerospace Inc. (NYSE:HWM). Junto Capital Management had $69.1 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $62.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Renaissance Technologies, and Alexander Mitchell’s Scopus Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Howmet Aerospace Inc. (NYSE:HWM) but similarly valued. We will take a look at Elanco Animal Health Incorporated (NYSE:ELAN), Pool Corporation (NASDAQ:POOL), PulteGroup, Inc. (NYSE:PHM), The J.M. Smucker Company (NYSE:SJM), Whirlpool Corporation (NYSE:WHR), Tata Motors Limited (NYSE:TTM), and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). This group of stocks’ market valuations resemble HWM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ELAN | 42 | 1710158 | -1 |
| POOL | 41 | 1014649 | 8 |
| PHM | 42 | 1050252 | 2 |
| SJM | 33 | 689844 | -1 |
| WHR | 28 | 1255044 | -4 |
| TTM | 8 | 67734 | 1 |
| BMRN | 43 | 1269182 | -8 |
| Average | 33.9 | 1008123 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $1008 million. That figure was $3960 million in HWM’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Howmet Aerospace Inc. (NYSE:HWM) is more popular among hedge funds. Our overall hedge fund sentiment score for HWM is 87. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately HWM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on HWM were disappointed as the stock returned 3.3% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Howmet Aerospace Inc. (NYSE:HWM)
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Disclosure: None. This article was originally published at Insider Monkey.
