Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Mercury Systems Inc (NASDAQ:MRCY).
Is Mercury Systems Inc (NASDAQ:MRCY) a buy, sell, or hold? The best stock pickers are taking a bullish view. The number of long hedge fund positions moved up by 3 in recent months. Our calculations also showed that mrcy isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most shareholders, hedge funds are viewed as unimportant, outdated financial tools of the past. While there are greater than 8,000 funds in operation at the moment, Our experts hone in on the moguls of this group, around 700 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the hedge fund industry’s total capital, and by tailing their best equity investments, Insider Monkey has deciphered several investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let’s take a look at the key hedge fund action regarding Mercury Systems Inc (NASDAQ:MRCY).
How are hedge funds trading Mercury Systems Inc (NASDAQ:MRCY)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MRCY over the last 13 quarters. So, let’s find 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, Richard Driehaus’s Driehaus Capital has the biggest position in Mercury Systems Inc (NASDAQ:MRCY), worth close to $13.2 million, amounting to 0.4% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which holds a $10.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish include Noam Gottesman’s GLG Partners, Peter Muller’s PDT Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Consequently, specific money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, created the most outsized position in Mercury Systems Inc (NASDAQ:MRCY). Driehaus Capital had $13.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new MRCY investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Dmitry Balyasny’s Balyasny Asset Management, and Israel Englander’s Millennium Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mercury Systems Inc (NASDAQ:MRCY) but similarly valued. These stocks are Prospect Capital Corporation (NASDAQ:PSEC), QEP Resources Inc (NYSE:QEP), Retail Properties of America Inc (NYSE:RPAI), and Cloudera, Inc. (NYSE:CLDR). All of these stocks’ market caps resemble MRCY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSEC | 11 | 46888 | 1 |
| QEP | 22 | 466803 | 3 |
| RPAI | 14 | 244414 | -3 |
| CLDR | 25 | 113418 | 12 |
| Average | 18 | 217881 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $35 million in MRCY’s case. Cloudera, Inc. (NYSE:CLDR) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Mercury Systems Inc (NASDAQ:MRCY) is even less popular than PSEC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
