Hedge Funds Taking a Cautious Approach With Mine Safety Appliances (MSA)

Investing in small-cap stocks has historically been a way to outperform the market, as small-cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller-cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Mine Safety Appliances (NYSE:MSA).

Mine Safety Appliances (NYSE:MSA) investors should pay attention to an increase in enthusiasm from smart money recently, with the stock being held in the portfolios of 19 smart money investors at the end of September. At the end of this article we will also compare MSA to other stocks including Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), The E.W. Scripps Company (NYSE:SSP), and El Paso Electric Company (NYSE:EE) to get a better sense of its popularity.

To most shareholders, hedge funds are seen as slow, outdated investment vehicles of the past. While there are more than 8,000 funds in operation at present, we hone in on the elite of this club, about 700 funds. These money managers have their hands on bulk of all hedge funds’ total capital, and by monitoring their matchless picks, Insider Monkey has unearthed several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s take a look at the new action encompassing Mine Safety Appliances (NYSE:MSA).

What does the smart money think about Mine Safety Appliances (NYSE:MSA)?

Heading into Q4, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 27% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or had already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in Mine Safety Appliances (NYSE:MSA), worth close to $10.2 million, accounting for 0.1% of its total 13F portfolio. The second-most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $9.6 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Gregg J. Powers’ Private Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

As industrywide interest jumped, specific money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Mine Safety Appliances (NYSE:MSA). Arrowstreet Capital had $1 million invested in the company at the end of the quarter. Paul Tudor Jones’ Tudor Investment Corp also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mine Safety Appliances (NYSE:MSA) but similarly valued. We will take a look at Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), The E.W. Scripps Company (NYSE:SSP), El Paso Electric Company (NYSE:EE), and Colliers International Group Inc (NASDAQ:CIGI). All of these stocks’ market caps match MSA’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $41 million in MSA’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand The E.W. Scripps Company (NYSE:SSP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Mine Safety Appliances (NYSE:MSA) is more popular among hedge funds, although the amount of money invested in it is less than any of the other companies. As we’d rather invest in companies that hedge funds are piling on and also pouring money into, IRWD may be a better candidate to consider a long position in at this time.