Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Moelis & Company (NYSE:MC) changed recently.
Moelis & Company (NYSE:MC) shareholders have witnessed an increase in enthusiasm from smart money of late. Our calculations also showed that MC isn’t among the 30 most popular stocks among hedge funds.
To most stock holders, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at present, We look at the upper echelon of this club, approximately 750 funds. These money managers shepherd bulk of the smart money’s total asset base, and by keeping an eye on their unrivaled equity investments, Insider Monkey has figured out various investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to check out the key hedge fund action surrounding Moelis & Company (NYSE:MC).
What does the smart money think about Moelis & Company (NYSE:MC)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MC over the last 14 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Moelis & Company (NYSE:MC), worth close to $16.1 million, amounting to 0.1% of its total 13F portfolio. On Royce & Associates’s heels is Millennium Management, managed by Israel Englander, which holds a $14.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Buckingham Capital Management, managed by David Keidan, created the most valuable position in Moelis & Company (NYSE:MC). Buckingham Capital Management had $2.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $2.1 million investment in the stock during the quarter. The following funds were also among the new MC investors: David Costen Haley’s HBK Investments, Matthew Tewksbury’s Stevens Capital Management, and Glenn Russell Dubin’s Highbridge Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Moelis & Company (NYSE:MC) but similarly valued. We will take a look at FCB Financial Holdings Inc (NYSE:FCB), Amkor Technology, Inc. (NASDAQ:AMKR), Kaman Corporation (NYSE:KAMN), and Bed Bath & Beyond Inc. (NASDAQ:BBBY). This group of stocks’ market valuations are similar to MC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCB | 18 | 269486 | -5 |
| AMKR | 24 | 51025 | 6 |
| KAMN | 12 | 257876 | -8 |
| BBBY | 30 | 197296 | 2 |
| Average | 21 | 193921 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $72 million in MC’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand Kaman Corporation (NYSE:KAMN) is the least popular one with only 12 bullish hedge fund positions. Moelis & Company (NYSE:MC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on MC, though not to the same extent, as the stock returned 20.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
