Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. What do these smart investors think about Mohawk Industries, Inc. (NYSE:MHK)?
Mohawk Industries, Inc. (NYSE:MHK) has seen a decrease in hedge fund interest in recent months. MHK was in 32 hedge funds’ portfolios at the end of September. There were 33 hedge funds in our database with MHK holdings at the end of the previous quarter. Our calculations also showed that MHK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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.
Boykin Curry of Eagle Capital
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 look at the fresh hedge fund action regarding Mohawk Industries, Inc. (NYSE:MHK).
Hedge fund activity in Mohawk Industries, Inc. (NYSE:MHK)
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MHK over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Boykin Curry’s Eagle Capital Management has the largest position in Mohawk Industries, Inc. (NYSE:MHK), worth close to $575.5 million, corresponding to 2% of its total 13F portfolio. The second most bullish fund manager is Pzena Investment Management, led by Richard S. Pzena, holding a $236.1 million position; 1.3% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish encompass Bob Peck and Andy Raab’s FPR Partners, Robert Rodriguez and Steven Romick’s First Pacific Advisors and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Cloverdale Capital Management allocated the biggest weight to Mohawk Industries, Inc. (NYSE:MHK), around 7.42% of its 13F portfolio. Fir Tree is also relatively very bullish on the stock, dishing out 5.04 percent of its 13F equity portfolio to MHK.
Judging by the fact that Mohawk Industries, Inc. (NYSE:MHK) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their full holdings by the end of the third quarter. Intriguingly, Robert Bishop’s Impala Asset Management sold off the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $96.5 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $19.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mohawk Industries, Inc. (NYSE:MHK) but similarly valued. These stocks are Crown Holdings, Inc. (NYSE:CCK), Beyond Meat, Inc. (NASDAQ:BYND), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), and Nice Systems Ltd (NASDAQ:NICE). This group of stocks’ market values match MHK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCK | 42 | 1266913 | 7 |
| BYND | 17 | 92936 | 1 |
| ALNY | 29 | 779948 | -6 |
| NICE | 16 | 375883 | -3 |
| Average | 26 | 628920 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $1523 million in MHK’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Nice Systems Ltd (NASDAQ:NICE) is the least popular one with only 16 bullish hedge fund positions. Mohawk Industries, Inc. (NYSE:MHK) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately MHK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MHK were disappointed as the stock returned 15% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
