We can judge whether Mallinckrodt PLC (NYSE:MNK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Mallinckrodt PLC (NYSE:MNK) a buy, sell, or hold? The best stock pickers are taking a pessimistic view. The number of long hedge fund positions were trimmed by 3 in recent months. Mallinckrodt PLC (NYSE:MNK) was in 40 hedge funds’ portfolios at the end of the third quarter of 2015. There were 43 hedge funds in our database with Mallinckrodt PLC (NYSE:MNK) positions at the end of the previous quarter. At the end of this article, we will also compare Mallinckrodt PLC (NYSE:MNK) to other stocks, including Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Alleghany Corporation (NYSE:Y), and Global Payments Inc (NYSE:GPN) to get a better sense of its popularity.
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If you’d ask most market participants, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are more than 8000 funds trading at the moment, our experts look at the elite of this club, around 700 funds. These investment experts handle the lion’s share of all hedge funds’ total asset base, and by observing their highest performing picks, Insider Monkey has deciphered various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, we’re going to review the fresh action regarding Mallinckrodt PLC (NYSE:MNK).
What have hedge funds been doing with Mallinckrodt PLC (NYSE:MNK)?
At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 7% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Paulson’s Paulson & Co has the largest position in Mallinckrodt PLC (NYSE:MNK), worth close to $421.6 million, amounting to 2.2% of its total 13F portfolio. On Paulson & Co’s heels is Viking Global, led by Andreas Halvorsen, holding a $250.1 million position; 1% of its 13F portfolio is allocated to the company. Remaining peers that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Neal C. Bradsher’s Broadwood Capital, and D E Shaw.
Seeing as Mallinckrodt PLC (NYSE:MNK) has faced a bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that slashed their full holdings in the third quarter. Interestingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP said goodbye to the largest position of all the hedgies watched by Insider Monkey, totaling an estimated $114.8 million in stock, and Roberto Mignone’s Bridger Management was right behind this move, as the fund sold off about $47.1 million worth of shares. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Mallinckrodt PLC (NYSE:MNK). These stocks are Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Alleghany Corporation (NYSE:Y), Global Payments Inc (NYSE:GPN), and Sabre Corp (NASDAQ:SABR). All of these stocks’ market caps match Mallinckrodt PLC (NYSE:MNK)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MPEL | 22 | 320399 | -1 |
| Y | 30 | 865434 | -3 |
| GPN | 27 | 549604 | 4 |
| SABR | 34 | 848653 | -1 |
As you can see, these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $646 million. That figure was $1.55 billion in Mallinckrodt PLC (NYSE:MNK)’s case. Sabre Corp (NASDAQ:SABR) is the most popular stock in this table. On the other hand, Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks, Mallinckrodt PLC (NYSE:MNK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
