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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Mettler-Toledo International Inc. (NYSE:MTD).
Is Mettler-Toledo International Inc. (NYSE:MTD) a cheap investment right now? Prominent investors are in an optimistic mood. The number of long hedge fund positions improved by 4 lately. Our calculations also showed that MTD 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). MTD was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 25 hedge funds in our database with MTD holdings at the end of the previous quarter.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
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. Now we’re going to take a gander at the latest hedge fund action encompassing Mettler-Toledo International Inc. (NYSE:MTD).
What have hedge funds been doing with Mettler-Toledo International Inc. (NYSE:MTD)?
At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the third quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in MTD a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Mettler-Toledo International Inc. (NYSE:MTD), which was worth $111.2 million at the end of the third quarter. On the second spot was Chilton Investment Company which amassed $83.6 million worth of shares. Impax Asset Management, Citadel Investment Group, 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 Chilton Investment Company allocated the biggest weight to Mettler-Toledo International Inc. (NYSE:MTD), around 2.67% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, designating 0.84 percent of its 13F equity portfolio to MTD.
Consequently, some big names were breaking ground themselves. Renaissance Technologies, founded by Jim Simons, initiated the biggest position in Mettler-Toledo International Inc. (NYSE:MTD). Renaissance Technologies had $18 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $10.3 million investment in the stock during the quarter. The other funds with brand new MTD positions are Peter Muller’s PDT Partners, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Ray Dalio’s Bridgewater Associates.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mettler-Toledo International Inc. (NYSE:MTD) but similarly valued. These stocks are The Clorox Company (NYSE:CLX), Cheniere Energy Partners LP (NYSE:CQP), Keysight Technologies Inc (NYSE:KEYS), and Apollo Global Management Inc. (NYSE:APO). All of these stocks’ market caps are similar to MTD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLX | 27 | 864420 | -10 |
| CQP | 7 | 19372 | 2 |
| KEYS | 49 | 1019974 | -1 |
| APO | 29 | 2225310 | 5 |
| Average | 28 | 1032269 | -1 |
View table here if you experience formatting issues.
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 $1032 million. That figure was $561 million in MTD’s case. Keysight Technologies Inc (NYSE:KEYS) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 7 bullish hedge fund positions. Mettler-Toledo International Inc. (NYSE:MTD) is not the most popular stock in this group but hedge fund interest is still above 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on MTD as the stock returned -21.5% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
