The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Mechel OAO (NYSE:MTL).
Mechel OAO (NYSE:MTL) investors should pay attention to an increase in hedge fund sentiment in recent months. Our calculations also showed that MTL 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.
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 44 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Israel Englander of Millennium Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the fresh hedge fund action surrounding Mechel OAO (NYSE:MTL).
What have hedge funds been doing with Mechel OAO (NYSE:MTL)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MTL over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mechel OAO (NYSE:MTL) was held by Renaissance Technologies, which reported holding $1.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.1 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
As aggregate interest increased, some big names have jumped into Mechel OAO (NYSE:MTL) headfirst. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Mechel OAO (NYSE:MTL). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mechel OAO (NYSE:MTL) but similarly valued. We will take a look at Vapotherm, Inc. (NYSE:VAPO), Magic Software Enterprises Ltd. (NASDAQ:MGIC), Agenus Inc (NASDAQ:AGEN), and Despegar.com, Corp. (NYSE:DESP). This group of stocks’ market caps match MTL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VAPO | 12 | 100026 | 2 |
| MGIC | 3 | 4732 | 0 |
| AGEN | 11 | 45308 | 0 |
| DESP | 16 | 84039 | 5 |
| Average | 10.5 | 58526 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $1 million in MTL’s case. Despegar.com, Corp. (NYSE:DESP) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Mechel OAO (NYSE:MTL) is even less popular than MGIC. Hedge funds clearly dropped the ball on MTL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on MTL as the stock returned 26.8% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
