Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider MAXIMUS, Inc. (NYSE:MMS) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is MAXIMUS, Inc. (NYSE:MMS) a good investment now? Prominent investors are selling. The number of bullish hedge fund bets retreated by 2 lately. Our calculations also showed that MMS 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According to most traders, hedge funds are perceived as underperforming, outdated financial tools of years past. While there are greater than 8000 funds with their doors open today, We hone in on the top tier of this club, about 850 funds. These investment experts preside over bulk of the hedge fund industry’s total capital, and by following their first-class equity investments, Insider Monkey has revealed numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually 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 .
Roger Ibbotson of Zebra Capital 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 go over the recent hedge fund action regarding MAXIMUS, Inc. (NYSE:MMS).
Hedge fund activity in MAXIMUS, Inc. (NYSE:MMS)
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MMS over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, P2 Capital Partners was the largest shareholder of MAXIMUS, Inc. (NYSE:MMS), with a stake worth $64 million reported as of the end of September. Trailing P2 Capital Partners was GLG Partners, which amassed a stake valued at $43.6 million. AQR Capital Management, Citadel Investment Group, and Millennium Management 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 P2 Capital Partners allocated the biggest weight to MAXIMUS, Inc. (NYSE:MMS), around 4.69% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.77 percent of its 13F equity portfolio to MMS.
Because MAXIMUS, Inc. (NYSE:MMS) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few fund managers who sold off their full holdings last quarter. Intriguingly, David Harding’s Winton Capital Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $7.7 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also cut its stock, about $1.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to MAXIMUS, Inc. (NYSE:MMS). We will take a look at Ryman Hospitality Properties, Inc. (NYSE:RHP), Deckers Outdoor Corp (NYSE:DECK), Shell Midstream Partners LP (NYSE:SHLX), and Tempur Sealy International Inc. (NYSE:TPX). This group of stocks’ market values are closest to MMS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RHP | 30 | 457764 | 6 |
| DECK | 43 | 689636 | 14 |
| SHLX | 8 | 38182 | 1 |
| TPX | 42 | 1239067 | 11 |
| Average | 30.75 | 606162 | 8 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $210 million in MMS’s case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 8 bullish hedge fund positions. MAXIMUS, Inc. (NYSE:MMS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 MMS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MMS investors were disappointed as the stock returned -24.9% 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 most of these stocks already outperformed the market in Q1.
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.
