At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Arch Resources, Inc. (NYSE:ARCH) makes for a good investment right now.
Arch Resources, Inc. (NYSE:ARCH) investors should pay attention to an increase in enthusiasm from smart money in recent months. Arch Resources, Inc. (NYSE:ARCH) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 42. Our calculations also showed that ARCH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Today there are numerous formulas stock traders have at their disposal to grade their stock investments. A pair of the most useful formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a very impressive amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind let's check out the fresh hedge fund action encompassing Arch Resources, Inc. (NYSE:ARCH).
Do Hedge Funds Think ARCH Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARCH over the last 24 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Arch Resources, Inc. (NYSE:ARCH) was held by Maple Rock Capital, which reported holding $44.7 million worth of stock at the end of June. It was followed by Luminus Management with a $32.6 million position. Other investors bullish on the company included Contrarian Capital, Citadel Investment Group, and Skylands Capital. In terms of the portfolio weights assigned to each position Maple Rock Capital allocated the biggest weight to Arch Resources, Inc. (NYSE:ARCH), around 6.72% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, earmarking 4.75 percent of its 13F equity portfolio to ARCH.
As one would reasonably expect, specific money managers were leading the bulls' herd. Encompass Capital Advisors, managed by Todd J. Kantor, established the most outsized position in Arch Resources, Inc. (NYSE:ARCH). Encompass Capital Advisors had $23.1 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $4.2 million position during the quarter. The following funds were also among the new ARCH investors: Louis Bacon's Moore Global Investments, Paul Marshall and Ian Wace's Marshall Wace LLP, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Arch Resources, Inc. (NYSE:ARCH) but similarly valued. We will take a look at The Geo Group, Inc. (NYSE:GEO), A10 Networks Inc (NYSE:ATEN), HomeStreet Inc (NASDAQ:HMST), HEXO Corp. (NYSE:HEXO), Earthstone Energy, Inc. (NYSE:ESTE), Village Farms International, Inc. (NASDAQ:VFF), and Heidrick & Struggles International, Inc. (NASDAQ:HSII). All of these stocks' market caps match ARCH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GEO,15,74572,2 ATEN,14,159941,-1 HMST,16,49280,4 HEXO,6,29137,0 ESTE,9,23792,1 VFF,6,11110,-2 HSII,15,142050,-2 Average,11.6,69983,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $277 million in ARCH's case. HomeStreet Inc (NASDAQ:HMST) is the most popular stock in this table. On the other hand HEXO Corp. (NYSE:HEXO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Arch Resources, Inc. (NYSE:ARCH) is more popular among hedge funds. Our overall hedge fund sentiment score for ARCH is 78. 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 returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on ARCH as the stock returned 65.6% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Get real-time email alerts: Follow Arch Resources Inc. (NYSE:ARCH)
Disclosure: None. This article was originally published at Insider Monkey.