Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Arcos Dorados Holding Inc (NYSE:ARCO).
Hedge fund interest in Arcos Dorados Holding Inc (NYSE:ARCO) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Universal Corp (NYSE:UVV), Cardtronics plc (NASDAQ:CATM), and Kite Realty Group Trust (NYSE:KRG) to gather more data points. Our calculations also showed that ARCO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are many formulas stock traders use to appraise publicly traded companies. Some of the most underrated formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outpace the S&P 500 by a healthy margin (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the new hedge fund action regarding Arcos Dorados Holding Inc (NYSE:ARCO).
What does smart money think about Arcos Dorados Holding Inc (NYSE:ARCO)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ARCO over the last 17 quarters. So, let’s examine 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, Charles de Vaulx’s International Value Advisers has the number one position in Arcos Dorados Holding Inc (NYSE:ARCO), worth close to $45.4 million, accounting for 1.7% of its total 13F portfolio. Coming in second is Amit Wadhwaney of Moerus Capital Management, with a $36.9 million position; 12.6% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism comprise Michael Larson’s Bill & Melinda Gates Foundation Trust, Israel Englander’s Millennium Management and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Arcos Dorados Holding Inc (NYSE:ARCO), around 12.57% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, earmarking 1.68 percent of its 13F equity portfolio to ARCO.
Seeing as Arcos Dorados Holding Inc (NYSE:ARCO) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds that slashed their full holdings heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest position of the “upper crust” of funds watched by Insider Monkey, comprising about $0.2 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also cut its stock, about $0.1 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Arcos Dorados Holding Inc (NYSE:ARCO). We will take a look at Universal Corp (NYSE:UVV), Cardtronics plc (NASDAQ:CATM), Kite Realty Group Trust (NYSE:KRG), and Gentherm Inc (NASDAQ:THRM). This group of stocks’ market caps match ARCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UVV | 15 | 110979 | -3 |
| CATM | 19 | 351967 | 0 |
| KRG | 10 | 60361 | 4 |
| THRM | 15 | 67220 | 0 |
| Average | 14.75 | 147632 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $119 million in ARCO’s case. Cardtronics plc (NASDAQ:CATM) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 10 bullish hedge fund positions. Arcos Dorados Holding Inc (NYSE:ARCO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ARCO as the stock returned 14.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
