Do Hedge Funds Love MKS Instruments, Inc. (MKSI)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about MKS Instruments, Inc. (NASDAQ:MKSI).

Is MKS Instruments, Inc. (NASDAQ:MKSI) a buy right now? Investors who are in the know were cutting their exposure. The number of long hedge fund bets fell by 5 in recent months. MKS Instruments, Inc. (NASDAQ:MKSI) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that MKSI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now we’re going to take a peek at the new hedge fund action regarding MKS Instruments, Inc. (NASDAQ:MKSI).

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

Heading into the second quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in MKSI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Royce & Associates was the largest shareholder of MKS Instruments, Inc. (NASDAQ:MKSI), with a stake worth $165 million reported as of the end of March. Trailing Royce & Associates was Fisher Asset Management, which amassed a stake valued at $95.4 million. Millennium Management, Value Holdings LP, and AQR Capital 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 Value Holdings LP allocated the biggest weight to MKS Instruments, Inc. (NASDAQ:MKSI), around 13.34% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, dishing out 1.98 percent of its 13F equity portfolio to MKSI.

Due to the fact that MKS Instruments, Inc. (NASDAQ:MKSI) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that decided to sell off their entire stakes heading into Q2. It’s worth mentioning that Principal Global Investors’s Columbus Circle Investors cut the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $14.1 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $9.7 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds heading into Q2.

Let’s now review hedge fund activity in other stocks similar to MKS Instruments, Inc. (NASDAQ:MKSI). We will take a look at Dun & Bradstreet Holdings, Inc. (NYSE:DNB), Dr. Reddy’s Laboratories Limited (NYSE:RDY), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Hubbell Incorporated (NYSE:HUBB), The Western Union Company (NYSE:WU), Teck Resources Ltd (NYSE:TECK), and Watsco Inc (NYSE:WSO). This group of stocks’ market valuations match MKSI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $513 million in MKSI’s case. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 12 bullish hedge fund positions. MKS Instruments, Inc. (NASDAQ:MKSI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MKSI is 41.6. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately MKSI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MKSI investors were disappointed as the stock returned -14.9% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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