We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Mesa Laboratories, Inc. (NASDAQ:MLAB).
Mesa Laboratories, Inc. (NASDAQ:MLAB) investors should be aware of a decrease in enthusiasm from smart money recently. Our calculations also showed that MLAB isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action regarding Mesa Laboratories, Inc. (NASDAQ:MLAB).
Hedge fund activity in Mesa Laboratories, Inc. (NASDAQ:MLAB)
Heading into the third quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MLAB over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Mesa Laboratories, Inc. (NASDAQ:MLAB). Royce & Associates has a $29.4 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Renaissance Technologies which holds a $11.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Brian Bares, Russell Mollen, and James Bradshaw’s Nine Ten Partners, David Harding’s Winton Capital Management and Paul Tudor Jones’s Tudor Investment Corp.
Since Mesa Laboratories, Inc. (NASDAQ:MLAB) has experienced declining sentiment from the smart money, it’s safe to say that there were a few hedgies that elected to cut their entire stakes last quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, comprising about $3.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.9 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mesa Laboratories, Inc. (NASDAQ:MLAB) but similarly valued. We will take a look at Valhi, Inc. (NYSE:VHI), ATN International, Inc. (NASDAQ:ATNI), U.S. Silica Holdings Inc (NYSE:SLCA), and SemGroup Corporation (NYSE:SEMG). All of these stocks’ market caps resemble MLAB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VHI | 6 | 8001 | 0 |
| ATNI | 9 | 61868 | -1 |
| SLCA | 17 | 281845 | 3 |
| SEMG | 15 | 65133 | 2 |
| Average | 11.75 | 104212 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $55 million in MLAB’s case. U.S. Silica Holdings Inc (NYSE:SLCA) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 6 bullish hedge fund positions. Mesa Laboratories, Inc. (NASDAQ:MLAB) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MLAB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MLAB investors were disappointed as the stock returned -2.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
