Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is Miller Industries, Inc. (NYSE:MLR) an exceptional stock to buy now? The smart money is turning bullish. The number of long hedge fund bets increased by 2 in recent months. Our calculations also showed that MLR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MLR was in 10 hedge funds’ portfolios at the end of the third quarter of 2019. There were 8 hedge funds in our database with MLR positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Joe Huber of Huber Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the recent hedge fund action regarding Miller Industries, Inc. (NYSE:MLR).
Hedge fund activity in Miller Industries, Inc. (NYSE:MLR)
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MLR over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Miller Industries, Inc. (NYSE:MLR) was held by Royce & Associates, which reported holding $44.1 million worth of stock at the end of September. It was followed by Huber Capital Management with a $4.6 million position. Other investors bullish on the company included Potrero Capital Research, Renaissance Technologies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Potrero Capital Research allocated the biggest weight to Miller Industries, Inc. (NYSE:MLR), around 1.73% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 0.57 percent of its 13F equity portfolio to MLR.
As aggregate interest increased, some big names were leading the bulls’ herd. Winton Capital Management, managed by David Harding, initiated the most valuable position in Miller Industries, Inc. (NYSE:MLR). Winton Capital Management had $1.8 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Miller Industries, Inc. (NYSE:MLR). We will take a look at ORBCOMM Inc (NASDAQ:ORBC), Cross Country Healthcare, Inc. (NASDAQ:CCRN), NI Holdings, Inc. (NASDAQ:NODK), and CAI International Inc (NYSE:CAI). All of these stocks’ market caps are closest to MLR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORBC | 14 | 62666 | 1 |
| CCRN | 14 | 31200 | 6 |
| NODK | 7 | 26044 | 1 |
| CAI | 12 | 106428 | -2 |
| Average | 11.75 | 56585 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $60 million in MLR’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand NI Holdings, Inc. (NASDAQ:NODK) is the least popular one with only 7 bullish hedge fund positions. Miller Industries, Inc. (NYSE:MLR) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MLR, though not to the same extent, as the stock returned 10.1% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
