Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Myers Industries, Inc. (NYSE:MYE).
Myers Industries, Inc. (NYSE:MYE) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of June. At the end of this article we will also compare MYE to other stocks including Cardlytics, Inc. (NASDAQ:CDLX), Morphic Holding, Inc. (NASDAQ:MORF), and Regis Corporation (NYSE:RGS) to get a better sense of its popularity. Our calculations also showed that MYE isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the recent hedge fund action surrounding Myers Industries, Inc. (NYSE:MYE).
How have hedgies been trading Myers Industries, Inc. (NYSE:MYE)?
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MYE over the last 16 quarters. So, let’s see 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 Myers Industries, Inc. (NYSE:MYE), with a stake worth $79.9 million reported as of the end of March. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $21.9 million. Wallace R. Weitz & Co., Arrowstreet Capital, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Weld Capital Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Myers Industries, Inc. (NYSE:MYE) but similarly valued. We will take a look at Cardlytics, Inc. (NASDAQ:CDLX), Morphic Holding, Inc. (NASDAQ:MORF), Regis Corporation (NYSE:RGS), and eXp World Holdings, Inc. (NASDAQ:EXPI). All of these stocks’ market caps are closest to MYE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CDLX | 10 | 102679 | 1 |
| MORF | 6 | 62838 | 6 |
| RGS | 14 | 245467 | -1 |
| EXPI | 2 | 323 | -2 |
| Average | 8 | 102827 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $112 million in MYE’s case. Regis Corporation (NYSE:RGS) is the most popular stock in this table. On the other hand eXp World Holdings, Inc. (NASDAQ:EXPI) is the least popular one with only 2 bullish hedge fund positions. Myers Industries, Inc. (NYSE:MYE) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MYE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MYE were disappointed as the stock returned -7.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
