Hedge Funds Are Piling Into MSC Industrial Direct Co Inc (MSM)

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 MSC Industrial Direct Co Inc (NYSE:MSM) changed recently.

Is MSC Industrial Direct Co Inc (NYSE:MSM) going to take off soon? Investors who are in the know were buying. The number of bullish hedge fund bets moved up by 7 recently. MSC Industrial Direct Co Inc (NYSE:MSM) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 30. Our calculations also showed that MSM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 18 hedge funds in our database with MSM positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s take a peek at the new hedge fund action regarding MSC Industrial Direct Co Inc (NYSE:MSM).

Donald Yacktman of Yacktman Asset Management

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

At third quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in MSM a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in MSC Industrial Direct Co Inc (NYSE:MSM) was held by Yacktman Asset Management, which reported holding $100.3 million worth of stock at the end of September. It was followed by Paradice Investment Management with a $71 million position. Other investors bullish on the company included Royce & Associates, Nitorum Capital, and AQR Capital Management. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to MSC Industrial Direct Co Inc (NYSE:MSM), around 3.21% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, setting aside 2.47 percent of its 13F equity portfolio to MSM.

As one would reasonably expect, specific money managers have jumped into MSC Industrial Direct Co Inc (NYSE:MSM) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in MSC Industrial Direct Co Inc (NYSE:MSM). Two Sigma Advisors had $9.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1.1 million position during the quarter. The following funds were also among the new MSM investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Bruce Kovner’s Caxton Associates LP, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s now review hedge fund activity in other stocks similar to MSC Industrial Direct Co Inc (NYSE:MSM). We will take a look at Terreno Realty Corporation (NYSE:TRNO), Umpqua Holdings Corp (NASDAQ:UMPQ), H&R Block, Inc. (NYSE:HRB), Matador Resources Co (NYSE:MTDR), Ryder System, Inc. (NYSE:R), Olo Inc. (NYSE:OLO), and Clearwater Analytics Holdings Inc. (NYSE:CWAN). This group of stocks’ market valuations resemble MSM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $386 million in MSM’s case. Matador Resources Co (NYSE:MTDR) is the most popular stock in this table. On the other hand Ryder System, Inc. (NYSE:R) is the least popular one with only 16 bullish hedge fund positions. MSC Industrial Direct Co Inc (NYSE:MSM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MSM is 75.9. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately MSM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MSM were disappointed as the stock returned 4% since the end of September (through 12/9) 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.