At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MRC Global Inc (NYSE:MRC) at the end of the second quarter and determine whether the smart money was really smart about this stock.
MRC Global Inc (NYSE:MRC) has seen an increase in hedge fund interest in recent months. MRC Global Inc (NYSE:MRC) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. Our calculations also showed that MRC 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.
In the eyes of most shareholders, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our experts look at the aristocrats of this club, around 850 funds. These money managers oversee most of the smart money’s total asset base, and by tracking their finest picks, Insider Monkey has come up with various investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year 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 .
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. With all of this in mind we’re going to review the new hedge fund action regarding MRC Global Inc (NYSE:MRC).
What have hedge funds been doing with MRC Global Inc (NYSE:MRC)?
At second quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in MRC a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in MRC Global Inc (NYSE:MRC) was held by D E Shaw, which reported holding $12.3 million worth of stock at the end of September. It was followed by Impax Asset Management with a $5.5 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Winton Capital Management. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to MRC Global Inc (NYSE:MRC), around 0.61% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to MRC.
Consequently, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in MRC Global Inc (NYSE:MRC). Arrowstreet Capital had $1.4 million invested in the company at the end of the quarter. Jeffrey Moskowitz’s Harvey Partners also initiated a $0.5 million position during the quarter. The other funds with brand new MRC positions are Donald Sussman’s Paloma Partners, Thomas Bailard’s Bailard Inc, and Cliff Asness’s AQR Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to MRC Global Inc (NYSE:MRC). We will take a look at Par Pacific Holdings, Inc. (NYSE:PARR), AC Immune SA (NASDAQ:ACIU), TCG BDC, Inc. (NASDAQ:CGBD), DBV Technologies SA (NASDAQ:DBVT), The First Bancshares, Inc. (MS) (NASDAQ:FBMS), Aptose Biosciences Inc (NASDAQ:APTO), and Rubius Therapeutics, Inc. (NASDAQ:RUBY). All of these stocks’ market caps match MRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PARR | 14 | 81939 | -4 |
| ACIU | 10 | 95458 | -1 |
| CGBD | 8 | 27806 | 1 |
| DBVT | 8 | 124910 | -2 |
| FBMS | 8 | 24775 | 3 |
| APTO | 18 | 164992 | 3 |
| RUBY | 7 | 2207 | 3 |
| Average | 10.4 | 74584 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $33 million in MRC’s case. Aptose Biosciences Inc (NASDAQ:APTO) is the most popular stock in this table. On the other hand Rubius Therapeutics, Inc. (NASDAQ:RUBY) is the least popular one with only 7 bullish hedge fund positions. MRC Global Inc (NYSE:MRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MRC is 77.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately MRC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MRC were disappointed as the stock returned -27.6% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Mrc Global Inc. (NYSE:MRC)
Follow Mrc Global Inc. (NYSE:MRC)
Disclosure: None. This article was originally published at Insider Monkey.
