Is ARNC Stock A Buy or Sell?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Arconic Corporation (NYSE:ARNC)? The smart money sentiment can provide an answer to this question.

Is ARNC stock a buy? Arconic Corporation (NYSE:ARNC) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 46. ARNC shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 21 hedge funds in our database with ARNC holdings at the end of September. Our calculations also showed that ARNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Didric Cederholm of Lion Point Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind let’s take a glance at the key hedge fund action regarding Arconic Corporation (NYSE:ARNC).

Do Hedge Funds Think ARNC Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 43 hedge funds with a bullish position in ARNC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Arconic Corporation (NYSE:ARNC) was held by Orbis Investment Management, which reported holding $356.4 million worth of stock at the end of December. It was followed by Elliott Investment Management with a $309.7 million position. Other investors bullish on the company included Kensico Capital, Arrowstreet Capital, and Lion Point. In terms of the portfolio weights assigned to each position Brightline Capital allocated the biggest weight to Arconic Corporation (NYSE:ARNC), around 9.45% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, designating 6.71 percent of its 13F equity portfolio to ARNC.

Consequently, some big names were breaking ground themselves. Nishkama Capital, managed by Ravee Mehta, initiated the largest position in Arconic Corporation (NYSE:ARNC). Nishkama Capital had $10.5 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new ARNC investors: Robert Vincent McHugh’s Jade Capital Advisors, D. E. Shaw’s D E Shaw, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Arconic Corporation (NYSE:ARNC) but similarly valued. We will take a look at Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), AllianceBernstein Holding LP (NYSE:AB), Brighthouse Financial, Inc. (NASDAQ:BHF), Ambarella Inc (NASDAQ:AMBA), ALLETE Inc (NYSE:ALE), LivaNova PLC (NASDAQ:LIVN), and Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB). All of these stocks’ market caps are closest to ARNC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $319 million. That figure was $904 million in ARNC’s case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 9 bullish hedge fund positions. Arconic Corporation (NYSE:ARNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARNC is 51.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately ARNC wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ARNC were disappointed as the stock returned -12.7% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.