Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Howmet Aerospace Inc. (NYSE:HWM) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Howmet Aerospace Inc. (NYSE:HWM) the right pick for your portfolio? The smart money was getting less optimistic. The number of bullish hedge fund bets were trimmed by 3 lately. Howmet Aerospace Inc. (NYSE:HWM) was in 44 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that HWM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Michael Lowenstein of Kensico Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the latest hedge fund action regarding Howmet Aerospace Inc. (NYSE:HWM).
Do Hedge Funds Think HWM Is A Good Stock To Buy Now?
At third quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards HWM over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Howmet Aerospace Inc. (NYSE:HWM) was held by Elliott Investment Management, which reported holding $1281.2 million worth of stock at the end of September. It was followed by Orbis Investment Management with a $634.5 million position. Other investors bullish on the company included Kensico Capital, Farallon Capital, and Adage Capital Management. In terms of the portfolio weights assigned to each position Kensico Capital allocated the biggest weight to Howmet Aerospace Inc. (NYSE:HWM), around 10.82% of its 13F portfolio. Elliott Investment Management is also relatively very bullish on the stock, setting aside 9.19 percent of its 13F equity portfolio to HWM.
Judging by the fact that Howmet Aerospace Inc. (NYSE:HWM) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds that slashed their positions entirely in the third quarter. Intriguingly, Robert Pitts’s Steadfast Capital Management cut the largest position of all the hedgies watched by Insider Monkey, comprising about $193.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $77.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s now review 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 Futu Holdings Limited (NASDAQ:FUTU), Citrix Systems, Inc. (NASDAQ:CTXS), WestRock Company (NYSE:WRK), Farfetch Limited (NYSE:FTCH), American Airlines Group Inc (NASDAQ:AAL), Teck Resources Ltd (NYSE:TECK), and Open Text Corporation (NASDAQ:OTEX). All of these stocks’ market caps are closest to HWM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FUTU | 23 | 664044 | -8 |
| CTXS | 24 | 766516 | 1 |
| WRK | 34 | 719952 | 2 |
| FTCH | 51 | 3258687 | -12 |
| AAL | 30 | 650793 | 5 |
| TECK | 41 | 1318693 | 1 |
| OTEX | 20 | 386647 | 6 |
| Average | 31.9 | 1109333 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $1109 million. That figure was $3495 million in HWM’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Open Text Corporation (NASDAQ:OTEX) is the least popular one with only 20 bullish hedge fund positions. Howmet Aerospace Inc. (NYSE:HWM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HWM is 66.6. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on HWM as the stock returned -0.3% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
Follow Howmet Aerospace Inc. (NYSE:HWM)
Follow Howmet Aerospace Inc. (NYSE:HWM)
Suggested Articles:
- 15 Biggest Renewable Energy Companies and Stocks
- 16 Best Luxury Resorts in Caribbean in 2021
- 10 Best Vegan Stocks to Buy Now
Disclosure: None. This article was originally published at Insider Monkey.
