Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of MTS Systems Corporation (NASDAQ:MTSC) and see how the stock is affected by the recent hedge fund activity.
Amid volatile trading, MTS Systems Corporation’s stock has lost 20% since the beginning of the year. However, the stock is trading at 20.1 times earnings and it registered an increase in popularity among the funds we track during the third quarter. MTS Systems Corporation was in 12 hedge funds’ portfolios at the end of September, compared to 9 funds in our database with MTSC holdings at the end of the previous quarter. At the end of this article we will also compare MTSC to other stocks, including Gener8 Maritime Inc (NYSE:GNRT), Atara Biotherapeutics Inc (NASDAQ:ATRA), and Flotek Industries Inc (NYSE:FTK) to get a better sense of its popularity.
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According to most market participants, hedge funds are seen as unimportant, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, We choose to focus on the moguls of this club, around 700 funds. Most estimates calculate that this group of people manage the lion’s share of the smart money’s total capital, and by following their finest stock picks, Insider Monkey has come up with several investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, we’re going to go over the fresh action regarding MTS Systems Corporation (NASDAQ:MTSC).
What have hedge funds been doing with MTS Systems Corporation (NASDAQ:MTSC)?
At the Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 33% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in MTS Systems Corporation (NASDAQ:MTSC). Royce & Associates has a $24.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, with a $20.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Joel Greenblatt’s Gotham Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and D. E. Shaw’s D E Shaw.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Gotham Asset Management established the biggest position in MTS Systems Corporation (NASDAQ:MTSC). Gotham Asset Management had $6.1 million invested in the company at the end of the quarter. Neil Chriss’ Hutchin Hill Capital also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new MTSC investors: George Hall’s Clinton Group and Matthew Tewksbury’s Stevens Capital Management.
Let’s now review hedge fund activity in other stocks similar to MTS Systems Corporation (NASDAQ:MTSC). These stocks are Gener8 Maritime Inc (NYSE:GNRT), Atara Biotherapeutics Inc (NASDAQ:ATRA), Flotek Industries Inc (NYSE:FTK), and Rapid7 Inc (NASDAQ:RPD). This group of stocks’ market values are closest to MTSC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GNRT | 21 | 493403 | -1 |
| ATRA | 11 | 293741 | 2 |
| FTK | 13 | 173981 | -1 |
| RPD | 5 | 13391 | 5 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $151 million in MTSC’s case. Gener8 Maritime Inc (NYSE:GNRT) is the most popular stock in this table. On the other hand Rapid7 Inc (NASDAQ:RPD) is the least popular one with only 5 bullish hedge fund positions. MTS Systems Corporation (NASDAQ:MTSC) 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 GNRT might be a better candidate to consider a long position.
