Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about Monro, Inc. (NASDAQ:MNRO).
Monro, Inc. (NASDAQ:MNRO) was in 10 hedge funds’ portfolios at the end of the third quarter of 2018. MNRO investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 13 hedge funds in our database with MNRO holdings at the end of the previous quarter. Our calculations also showed that mnro isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action surrounding Monro, Inc. (NASDAQ:MNRO).
How have hedgies been trading Monro, Inc. (NASDAQ:MNRO)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the second quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in MNRO heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Monro, Inc. (NASDAQ:MNRO) was held by Arlington Value Capital, which reported holding $115.3 million worth of stock at the end of September. It was followed by Royce & Associates with a $27.7 million position. Other investors bullish on the company included Diker Management, Two Sigma Advisors, and Maverick Capital.
Judging by the fact that Monro, Inc. (NASDAQ:MNRO) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds who were dropping their full holdings by the end of the third quarter. Intriguingly, Anthony P. Brenner’s Pivot Point Capital dropped the largest investment of all the hedgies tracked by Insider Monkey, totaling about $6.2 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $0.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Monro Inc (NASDAQ:MNRO). We will take a look at Transportadora de Gas del Sur SA (NYSE:TGS), Acadia Realty Trust (NYSE:AKR), Amicus Therapeutics, Inc. (NASDAQ:FOLD), and Brady Corp (NYSE:BRC). All of these stocks’ market caps match MNRO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGS | 9 | 59002 | 2 |
| AKR | 9 | 130212 | -2 |
| FOLD | 30 | 761559 | 3 |
| BRC | 17 | 241260 | -2 |
| Average | 16.25 | 298008 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $171 million in MNRO’s case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (NYSE:TGS) is the least popular one with only 9 bullish hedge fund positions. Monro Inc (NASDAQ:MNRO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FOLD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
