Hedge Funds Are Dumping Mistras Group, Inc. (MG)

In this article you are going to find out whether hedge funds think Mistras Group, Inc. (NYSE:MG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Mistras Group, Inc. (NYSE:MG) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 15. MG has seen a decrease in support from the world’s most elite money managers recently. There were 11 hedge funds in our database with MG holdings at the end of March. Our calculations also showed that MG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. 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. Now we’re going to check out the key hedge fund action regarding Mistras Group, Inc. (NYSE:MG).

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

Heading into the third quarter of 2021, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MG over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Thomas E. Lynch’s Mill Road Capital Management has the biggest position in Mistras Group, Inc. (NYSE:MG), worth close to $11.2 million, comprising 3.8% of its total 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $7.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions consist of Ali Motamed’s Invenomic Capital Management, Steve Pei’s Gratia Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Gratia Capital allocated the biggest weight to Mistras Group, Inc. (NYSE:MG), around 4.42% of its 13F portfolio. Mill Road Capital Management is also relatively very bullish on the stock, setting aside 3.76 percent of its 13F equity portfolio to MG.

Since Mistras Group, Inc. (NYSE:MG) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers who sold off their entire stakes heading into Q3. Intriguingly, Greg Eisner’s Engineers Gate Manager said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $0.3 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mistras Group, Inc. (NYSE:MG) but similarly valued. We will take a look at Red Violet, Inc. (NASDAQ:RDVT), Renren Inc (NYSE:RENN), NavSight Holdings, Inc. (NYSE:NSH), Ciner Resources LP (NYSE:CINR), Summit Financial Group, Inc. (NASDAQ:SMMF), Jiayin Group Inc. (NASDAQ:JFIN), and Sol-Gel Technologies Ltd. (NASDAQ:SLGL). This group of stocks’ market valuations are similar to MG’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $33 million in MG’s case. NavSight Holdings, Inc. (NYSE:NSH) is the most popular stock in this table. On the other hand Renren Inc (NYSE:RENN) is the least popular one with only 1 bullish hedge fund positions. Mistras Group, Inc. (NYSE:MG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MG is 41.3. 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 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately MG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MG were disappointed as the stock returned 2.2% since the end of June (through 9/27) 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.