Is MYR Group Inc (NASDAQ:MYRG) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is MYR Group Inc (NASDAQ:MYRG) ready to rally soon? Prominent investors are becoming hopeful. The number of bullish hedge fund bets advanced by 3 lately. Our calculations also showed that MYRG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MYRG was in 14 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with MYRG holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Martin Whitman of Third Avenue Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the key hedge fund action surrounding MYR Group Inc (NASDAQ:MYRG).
What have hedge funds been doing with MYR Group Inc (NASDAQ:MYRG)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in MYRG a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Third Avenue Management was the largest shareholder of MYR Group Inc (NASDAQ:MYRG), with a stake worth $12 million reported as of the end of September. Trailing Third Avenue Management was AQR Capital Management, which amassed a stake valued at $3.6 million. Fisher Asset Management, Arrowstreet Capital, and Citadel Investment Group 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 Third Avenue Management allocated the biggest weight to MYR Group Inc (NASDAQ:MYRG), around 1.08% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to MYRG.
As industrywide interest jumped, some big names have jumped into MYR Group Inc (NASDAQ:MYRG) headfirst. ExodusPoint Capital, managed by Michael Gelband, assembled the biggest position in MYR Group Inc (NASDAQ:MYRG). ExodusPoint Capital had $0.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $0 million position during the quarter. The only other fund with a brand new MYRG position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to MYR Group Inc (NASDAQ:MYRG). These stocks are WideOpenWest, Inc. (NYSE:WOW), United Community Financial Corp (NASDAQ:UCFC), Quotient Limited (NASDAQ:QTNT), and Hoegh LNG Partners LP (NYSE:HMLP). All of these stocks’ market caps are similar to MYRG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WOW | 13 | 19948 | 5 |
| UCFC | 11 | 38619 | 2 |
| QTNT | 20 | 229868 | 0 |
| HMLP | 5 | 17184 | -1 |
| Average | 12.25 | 76405 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $24 million in MYRG’s case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand Hoegh LNG Partners LP (NYSE:HMLP) is the least popular one with only 5 bullish hedge fund positions. MYR Group Inc (NASDAQ:MYRG) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MYRG, though not to the same extent, as the stock returned 9.8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
