Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Aluminum Corp. of China Limited (NYSE:ACH).
Aluminum Corp. of China Limited (NYSE:ACH) was in 3 hedge funds’ portfolios at the end of September. ACH investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. There were 5 hedge funds in our database with ACH positions at the end of the previous quarter. 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 below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. 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 Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a gander at the key hedge fund action encompassing Aluminum Corp. of China Limited (NYSE:ACH).
What have hedge funds been doing with Aluminum Corp. of China Limited (NYSE:ACH)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ACH over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Aluminum Corp. of China Limited (NYSE:ACH), which was worth $4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $0.2 million worth of shares. PEAK6 Capital Management was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Aluminum Corp. of China Limited (NYSE:ACH), around 0.0034% of its 13F portfolio. PEAK6 Capital Management is also relatively very bullish on the stock, setting aside 0.0004 percent of its 13F equity portfolio to ACH.
Seeing as Aluminum Corp. of China Limited (NYSE:ACH) has witnessed declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of funds who were dropping their full holdings heading into Q4. Interestingly, Cliff Asness’s AQR Capital Management said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $0.1 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Aluminum Corp. of China Limited (NYSE:ACH) but similarly valued. These stocks are Parsley Energy Inc (NYSE:PE), Trex Company, Inc. (NYSE:TREX), Williams-Sonoma, Inc. (NYSE:WSM), and PG&E Corporation (NYSE:PCG). This group of stocks’ market caps resemble ACH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PE | 44 | 778914 | 8 |
| TREX | 18 | 104493 | -1 |
| WSM | 24 | 287642 | -3 |
| PCG | 64 | 2847473 | -3 |
| Average | 37.5 | 1004631 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1005 million. That figure was $4 million in ACH’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Trex Company, Inc. (NYSE:TREX) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Aluminum Corp. of China Limited (NYSE:ACH) is even less popular than TREX. Hedge funds dodged a bullet by taking a bearish stance towards ACH. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ACH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ACH investors were disappointed as the stock returned -1.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
