Hedge Funds Are Coming Back To MAXIMUS, Inc. (MMS)

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards MAXIMUS, Inc. (NYSE:MMS) changed recently.

MAXIMUS, Inc. (NYSE:MMS) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistic is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MMS investors should be aware of an increase in hedge fund interest of late. There were 18 hedge funds in our database with MMS holdings at the end of March. Our calculations also showed that MMS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s analyze the recent hedge fund action surrounding MAXIMUS, Inc. (NYSE:MMS).

Do Hedge Funds Think MMS Is A Good Stock To Buy Now?

At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the first quarter of 2020. On the other hand, there were a total of 26 hedge funds with a bullish position in MMS a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, 12th Street Asset Management was the largest shareholder of MAXIMUS, Inc. (NYSE:MMS), with a stake worth $23.7 million reported as of the end of June. Trailing 12th Street Asset Management was Arrowstreet Capital, which amassed a stake valued at $23.2 million. AQR Capital Management, Renaissance Technologies, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to MAXIMUS, Inc. (NYSE:MMS), around 4.93% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, earmarking 3.02 percent of its 13F equity portfolio to MMS.

As aggregate interest increased, key money managers have jumped into MAXIMUS, Inc. (NYSE:MMS) headfirst. Millennium Management, managed by Israel Englander, initiated the most valuable position in MAXIMUS, Inc. (NYSE:MMS). Millennium Management had $4.9 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new MMS investors: Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), Bruce Kovner’s Caxton Associates LP, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks similar to MAXIMUS, Inc. (NYSE:MMS). These stocks are Pilgrim’s Pride Corporation (NASDAQ:PPC), Diversey Holdings, Ltd. (NASDAQ:DSEY), Crane Co. (NYSE:CR), KBR, Inc. (NYSE:KBR), Ballard Power Systems Inc. (NASDAQ:BLDP), Qurate Retail, Inc. (NASDAQ:QRTEA), and Coursera, Inc. (NYSE:COUR). This group of stocks’ market caps resemble MMS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $383 million. That figure was $129 million in MMS’s case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand Coursera, Inc. (NYSE:COUR) is the least popular one with only 11 bullish hedge fund positions. MAXIMUS, Inc. (NYSE:MMS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MMS is 66.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately MMS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MMS were disappointed as the stock returned -1.6% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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