Hedge Fund Sentiment Is Stagnant On The Middleby Corporation (MIDD)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought The Middleby Corporation (NASDAQ:MIDD) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in The Middleby Corporation (NASDAQ:MIDD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MIDD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as NewMarket Corporation (NYSE:NEU), Silicon Laboratories (NASDAQ:SLAB), and Sinopec Shanghai Petrochemical Co. (NYSE:SHI) to gather more data points. Our calculations also showed that MIDD isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

If you’d ask most investors, hedge funds are seen as worthless, outdated financial tools of the past. While there are greater than 8000 funds with their doors open today, We look at the moguls of this group, about 850 funds. It is estimated that this group of investors manage most of the smart money’s total asset base, and by keeping track of their top equity investments, Insider Monkey has deciphered various investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to check out the fresh hedge fund action surrounding The Middleby Corporation (NASDAQ:MIDD).

What does smart money think about The Middleby Corporation (NASDAQ:MIDD)?

At the end of June, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MIDD over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in The Middleby Corporation (NASDAQ:MIDD). Arrowstreet Capital has a $42.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $39.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Brian Bares’s Bares Capital Management, D. E. Shaw’s D E Shaw and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to The Middleby Corporation (NASDAQ:MIDD), around 0.81% of its 13F portfolio. Islet Management is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to MIDD.

Seeing as The Middleby Corporation (NASDAQ:MIDD) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that decided to sell off their positions entirely in the second quarter. Intriguingly, Renaissance Technologies dropped the biggest stake of all the hedgies followed by Insider Monkey, valued at about $6.7 million in stock, and Greg Poole’s Echo Street Capital Management was right behind this move, as the fund dumped about $1.9 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Middleby Corporation (NASDAQ:MIDD) but similarly valued. These stocks are NewMarket Corporation (NYSE:NEU), Silicon Laboratories (NASDAQ:SLAB), Sinopec Shanghai Petrochemical Co. (NYSE:SHI), Mercury Systems Inc (NASDAQ:MRCY), Schneider National, Inc. (NYSE:SNDR), FirstService Corporation (TSE:FSV), and Choice Hotels International, Inc. (NYSE:CHH). All of these stocks’ market caps are closest to MIDD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $166 million in MIDD’s case. Silicon Laboratories (NASDAQ:SLAB) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. The Middleby Corporation (NASDAQ:MIDD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MIDD is 73.3. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on MIDD as the stock returned 14.3% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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