Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MSC Industrial Direct Co Inc (NYSE:MSM).
MSC Industrial Direct Co Inc (NYSE:MSM) was in 30 hedge funds’ portfolios at the end of December. MSM investors should be aware of an increase in support from the world’s most elite money managers lately. There were 24 hedge funds in our database with MSM positions at the end of the previous quarter. Our calculations also showed that MSM 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).
According to most market participants, hedge funds are seen as slow, outdated investment vehicles of yesteryear. While there are more than 8000 funds in operation at the moment, Our experts hone in on the crème de la crème of this club, about 850 funds. These money managers control the majority of the smart money’s total capital, and by monitoring their finest picks, Insider Monkey has figured out many investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
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. Keeping this in mind we’re going to take a peek at the fresh hedge fund action regarding MSC Industrial Direct Co Inc (NYSE:MSM).
What does smart money think about MSC Industrial Direct Co Inc (NYSE:MSM)?
Heading into the first quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in MSM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Paradice Investment Management was the largest shareholder of MSC Industrial Direct Co Inc (NYSE:MSM), with a stake worth $68.3 million reported as of the end of September. Trailing Paradice Investment Management was Pzena Investment Management, which amassed a stake valued at $32.2 million. Renaissance Technologies, Citadel Investment Group, and GLG Partners 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 Paradice Investment Management allocated the biggest weight to MSC Industrial Direct Co Inc (NYSE:MSM), around 4.75% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, dishing out 1.59 percent of its 13F equity portfolio to MSM.
As one would reasonably expect, key money managers have jumped into MSC Industrial Direct Co Inc (NYSE:MSM) headfirst. Pzena Investment Management, managed by Richard S. Pzena, initiated the most valuable position in MSC Industrial Direct Co Inc (NYSE:MSM). Pzena Investment Management had $32.2 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $13.5 million investment in the stock during the quarter. The following funds were also among the new MSM investors: David Harding’s Winton Capital Management, Ray Dalio’s Bridgewater Associates, and Hoon Kim’s Quantinno Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MSC Industrial Direct Co Inc (NYSE:MSM) but similarly valued. We will take a look at BridgeBio Pharma, Inc. (NASDAQ:BBIO), nVent Electric plc (NYSE:NVT), CIT Group Inc. (NYSE:CIT), and KBR, Inc. (NYSE:KBR). This group of stocks’ market values match MSM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BBIO | 11 | 1324595 | -1 |
| NVT | 28 | 728891 | 5 |
| CIT | 35 | 956120 | 6 |
| KBR | 29 | 515428 | -2 |
| Average | 25.75 | 881259 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $881 million. That figure was $253 million in MSM’s case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 11 bullish hedge fund positions. MSC Industrial Direct Co Inc (NYSE:MSM) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately MSM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MSM were disappointed as the stock returned -32.2% during the same time period 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.
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.
