Does Morningstar, Inc. (NASDAQ:MORN) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Morningstar, Inc. (NASDAQ:MORN) worth your attention right now? The best stock pickers are getting more optimistic. The number of long hedge fund bets went up by 1 lately. Our calculations also showed that MORN isn’t among the 30 most popular stocks among hedge funds. MORN was in 21 hedge funds’ portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with MORN 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 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 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 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.
Let’s take a glance at the fresh hedge fund action surrounding Morningstar, Inc. (NASDAQ:MORN).
Hedge fund activity in Morningstar, Inc. (NASDAQ:MORN)
Heading into the second quarter of 2019, 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 MORN over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Morningstar, Inc. (NASDAQ:MORN), with a stake worth $87.7 million reported as of the end of March. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $68.1 million. Arrowstreet Capital, Millennium Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, initiated the most outsized position in Morningstar, Inc. (NASDAQ:MORN). BlueCrest Capital Mgmt. had $0.6 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $0.4 million position during the quarter.
Let’s check out hedge fund activity in other stocks similar to Morningstar, Inc. (NASDAQ:MORN). These stocks are Gentex Corporation (NASDAQ:GNTX), New York Community Bancorp, Inc. (NYSE:NYCB-U), Pure Storage, Inc. (NYSE:PSTG), and AGCO Corporation (NYSE:AGCO). This group of stocks’ market valuations resemble MORN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GNTX | 23 | 308447 | 0 |
| NYCB-U | 3 | 26107 | 1 |
| PSTG | 21 | 725624 | -5 |
| AGCO | 26 | 200918 | -6 |
| Average | 18.25 | 315274 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $315 million. That figure was $226 million in MORN’s case. AGCO Corporation (NYSE:AGCO) is the most popular stock in this table. On the other hand New York Community Bancorp, Inc. (NYSE:NYCB-U) is the least popular one with only 3 bullish hedge fund positions. Morningstar, Inc. (NASDAQ:MORN) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on MORN as the stock returned 15.4% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
