Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to MGIC Investment Corporation (NYSE:MTG) changed recently.
Is MGIC Investment Corporation (NYSE:MTG) an outstanding investment today? The smart money is turning bullish. The number of bullish hedge fund positions rose by 4 recently. Our calculations also showed that MTG 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). MTG was in 39 hedge funds’ portfolios at the end of the third quarter of 2019. There were 35 hedge funds in our database with MTG positions at the end of the previous quarter.
To most shareholders, hedge funds are perceived as unimportant, old investment vehicles of years past. While there are more than 8000 funds trading at present, Our experts choose to focus on the masters of this club, around 750 funds. These money managers oversee bulk of the hedge fund industry’s total asset base, and by tracking their finest equity investments, Insider Monkey has come up with several investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Steven Cohen of Point72 Asset Management
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 we’re going to go over the new hedge fund action surrounding MGIC Investment Corporation (NYSE:MTG).
Hedge fund activity in MGIC Investment Corporation (NYSE:MTG)
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in MTG a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steve Cohen’s Point72 Asset Management has the biggest position in MGIC Investment Corporation (NYSE:MTG), worth close to $100.9 million, corresponding to 0.6% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $84.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of Renaissance Technologies, Noam Gottesman’s GLG Partners and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Almitas Capital allocated the biggest weight to MGIC Investment Corporation (NYSE:MTG), around 2.04% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 1.75 percent of its 13F equity portfolio to MTG.
With a general bullishness amongst the heavyweights, specific money managers have jumped into MGIC Investment Corporation (NYSE:MTG) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the biggest position in MGIC Investment Corporation (NYSE:MTG). Marshall Wace had $20.2 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $6.2 million position during the quarter. The following funds were also among the new MTG investors: Carl Goldsmith and Scott Klein’s Beach Point Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and David Andre and Astro Teller’s Cerebellum Capital.
Let’s also examine hedge fund activity in other stocks similar to MGIC Investment Corporation (NYSE:MTG). We will take a look at Blackbaud, Inc. (NASDAQ:BLKB), J2 Global Inc (NASDAQ:JCOM), Spire Inc. (NYSE:SR), and CVR Energy, Inc. (NYSE:CVI). This group of stocks’ market values are similar to MTG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLKB | 12 | 72983 | 2 |
| JCOM | 18 | 280780 | -6 |
| SR | 13 | 80974 | 1 |
| CVI | 26 | 3273232 | 7 |
| Average | 17.25 | 926992 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $927 million. That figure was $566 million in MTG’s case. CVR Energy, Inc. (NYSE:CVI) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks MGIC Investment Corporation (NYSE:MTG) is more popular among hedge funds. 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. Hedge funds were also right about betting on MTG, though not to the same extent, as the stock returned 37.4% during the same period and outperformed the market as well.
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.
