Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 20% in 2019 (through September 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 24% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Modine Manufacturing Company (NYSE:MOD).
Modine Manufacturing Company (NYSE:MOD) investors should be aware of an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that MOD 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. Let’s check out the latest hedge fund action surrounding Modine Manufacturing Company (NYSE:MOD).
Hedge fund activity in Modine Manufacturing Company (NYSE:MOD)
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MOD over the last 16 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Modine Manufacturing Company (NYSE:MOD) was held by GAMCO Investors, which reported holding $22.5 million worth of stock at the end of March. It was followed by Royce & Associates with a $15.6 million position. Other investors bullish on the company included DC Capital Partners, D E Shaw, and Renaissance Technologies.
As industrywide interest jumped, some big names have jumped into Modine Manufacturing Company (NYSE:MOD) headfirst. Zebra Capital Management, managed by Roger Ibbotson, initiated the most outsized position in Modine Manufacturing Company (NYSE:MOD). Zebra Capital Management had $0.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.5 million position during the quarter. The following funds were also among the new MOD investors: Minhua Zhang’s Weld Capital Management and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks similar to Modine Manufacturing Company (NYSE:MOD). These stocks are Byline Bancorp, Inc. (NYSE:BY), Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), Nova Measuring Instruments Ltd. (NASDAQ:NVMI), and Vanda Pharmaceuticals Inc. (NASDAQ:VNDA). This group of stocks’ market valuations are closest to MOD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BY | 5 | 19950 | 2 |
| GLDD | 22 | 100002 | 4 |
| NVMI | 9 | 141351 | -2 |
| VNDA | 18 | 226175 | -1 |
| Average | 13.5 | 121870 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $78 million in MOD’s case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Byline Bancorp, Inc. (NYSE:BY) is the least popular one with only 5 bullish hedge fund positions. Modine Manufacturing Company (NYSE:MOD) 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 MOD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MOD were disappointed as the stock returned -20.5% 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.
