How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Manpowergroup Inc (NYSE:MAN) and determine whether hedge funds had an edge regarding this stock.
Manpowergroup Inc (NYSE:MAN) shareholders have witnessed a decrease in hedge fund interest in recent months. Our calculations also showed that MAN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s take a glance at the new hedge fund action regarding Manpowergroup Inc (NYSE:MAN).
Hedge fund activity in Manpowergroup Inc (NYSE:MAN)
At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MAN over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Manpowergroup Inc (NYSE:MAN), which was worth $197.2 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $12.2 million worth of shares. Millennium Management, D E Shaw, and Gotham Asset Management were 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 Neo Ivy Capital allocated the biggest weight to Manpowergroup Inc (NYSE:MAN), around 0.51% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, dishing out 0.33 percent of its 13F equity portfolio to MAN.
Since Manpowergroup Inc (NYSE:MAN) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their entire stakes in the first quarter. It’s worth mentioning that James Parsons’s Junto Capital Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $41 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $19.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in the first quarter.
Let’s check out hedge fund activity in other stocks similar to Manpowergroup Inc (NYSE:MAN). We will take a look at Popular Inc (NASDAQ:BPOP), Global Blood Therapeutics Inc (NASDAQ:GBT), Hexcel Corporation (NYSE:HXL), and Strategic Education Inc (NASDAQ:STRA). All of these stocks’ market caps resemble MAN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BPOP | 28 | 468895 | -5 |
| GBT | 23 | 431206 | 0 |
| HXL | 27 | 187145 | -3 |
| STRA | 13 | 228871 | 0 |
| Average | 22.75 | 329029 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $329 million. That figure was $244 million in MAN’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand Strategic Education Inc (NASDAQ:STRA) is the least popular one with only 13 bullish hedge fund positions. Manpowergroup Inc (NYSE:MAN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on MAN as the stock returned 31.6% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
