We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Mantech International Corp (NASDAQ:MANT)? The smart money sentiment can provide an answer to this question.
Mantech International Corp (NASDAQ:MANT) has experienced an increase in hedge fund interest recently. Our calculations also showed that MANT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind let’s check out the recent hedge fund action regarding Mantech International Corp (NASDAQ:MANT).
What have hedge funds been doing with Mantech International Corp (NASDAQ:MANT)?
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the third quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in MANT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mantech International Corp (NASDAQ:MANT) was held by GLG Partners, which reported holding $12.6 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $7.5 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Mantech International Corp (NASDAQ:MANT), around 0.43% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.35 percent of its 13F equity portfolio to MANT.
Consequently, some big names were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Mantech International Corp (NASDAQ:MANT). Marshall Wace LLP had $7.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1.4 million position during the quarter. The other funds with brand new MANT positions are Peter Muller’s PDT Partners, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mantech International Corp (NASDAQ:MANT) but similarly valued. These stocks are Enphase Energy Inc (NASDAQ:ENPH), American States Water Co (NYSE:AWR), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), and Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH). This group of stocks’ market values are similar to MANT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENPH | 39 | 443293 | 6 |
| AWR | 21 | 55302 | 4 |
| KOF | 10 | 493100 | -3 |
| DCPH | 28 | 699426 | 2 |
| Average | 24.5 | 422780 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $423 million. That figure was $50 million in MANT’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 10 bullish hedge fund positions. Mantech International Corp (NASDAQ:MANT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on MANT as the stock returned -15.3% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
