In this article we will check out the progression of hedge fund sentiment towards The Marcus Corporation (NYSE:MCS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
The Marcus Corporation (NYSE:MCS) was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. MCS has seen a decrease in activity from the world’s largest hedge funds of late. There were 15 hedge funds in our database with MCS holdings at the end of the previous quarter. Our calculations also showed that MCS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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. 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 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the key hedge fund action surrounding The Marcus Corporation (NYSE:MCS).
How are hedge funds trading The Marcus Corporation (NYSE:MCS)?
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in MCS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GAMCO Investors was the largest shareholder of The Marcus Corporation (NYSE:MCS), with a stake worth $9.8 million reported as of the end of September. Trailing GAMCO Investors was Two Sigma Advisors, which amassed a stake valued at $1.8 million. Marshall Wace LLP, Royce & Associates, and Arrowstreet Capital 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 GAMCO Investors allocated the biggest weight to The Marcus Corporation (NYSE:MCS), around 0.12% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to MCS.
Due to the fact that The Marcus Corporation (NYSE:MCS) has witnessed falling interest from hedge fund managers, we can see that there exists a select few fund managers that slashed their full holdings in the first quarter. At the top of the heap, Benjamin A. Smith’s Laurion Capital Management said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $2.6 million in stock, and Charles Paquelet’s Skylands Capital was right behind this move, as the fund said goodbye to about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to The Marcus Corporation (NYSE:MCS). We will take a look at Par Pacific Holdings, Inc. (NYSE:PARR), Independence Holding Company (NYSE:IHC), Hawkins, Inc. (NASDAQ:HWKN), and Switchback Energy Acquisition Corporation (NYSE:SBE). This group of stocks’ market values are closest to MCS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PARR | 18 | 48678 | 0 |
| IHC | 2 | 13618 | -3 |
| HWKN | 5 | 8259 | -3 |
| SBE | 15 | 95680 | -1 |
| Average | 10 | 41559 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $20 million in MCS’s case. Par Pacific Holdings, Inc. (NYSE:PARR) is the most popular stock in this table. On the other hand Independence Holding Company (NYSE:IHC) is the least popular one with only 2 bullish hedge fund positions. The Marcus Corporation (NYSE:MCS) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately MCS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MCS were disappointed as the stock returned 1.9% during the same time period 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.
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Disclosure: None. This article was originally published at Insider Monkey.
