We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Magna International Inc. (NYSE:MGA).
Is Magna International Inc. (NYSE:MGA) going to take off soon? The best stock pickers are becoming hopeful. The number of bullish hedge fund bets inched up by 4 in recent months. Our calculations also showed that MGA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). MGA was in 23 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with MGA holdings at the end of the previous quarter.
At the moment there are a large number of methods market participants employ to evaluate their stock investments. Some of the less utilized methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass their index-focused peers by a healthy margin (see the details here).
Noam Gottesman of GLG Partners
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. Now let’s take a peek at the new hedge fund action regarding Magna International Inc. (NYSE:MGA).
How are hedge funds trading Magna International Inc. (NYSE:MGA)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MGA over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Magna International Inc. (NYSE:MGA), which was worth $429.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $77.4 million worth of shares. East Side Capital (RR Partners), GLG Partners, and Heathbridge Capital 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 Heathbridge Capital Management allocated the biggest weight to Magna International Inc. (NYSE:MGA), around 6.51% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, dishing out 5.58 percent of its 13F equity portfolio to MGA.
As one would reasonably expect, key hedge funds were breaking ground themselves. Albar Capital, managed by Javier Velazquez, assembled the biggest position in Magna International Inc. (NYSE:MGA). Albar Capital had $3.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $2.9 million position during the quarter. The other funds with brand new MGA positions are Donald Sussman’s Paloma Partners, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s now review hedge fund activity in other stocks similar to Magna International Inc. (NYSE:MGA). We will take a look at Dover Corporation (NYSE:DOV), Conagra Brands, Inc. (NYSE:CAG), Maxim Integrated Products Inc. (NASDAQ:MXIM), and WellCare Health Plans, Inc. (NYSE:WCG). All of these stocks’ market caps are similar to MGA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOV | 29 | 547165 | -6 |
| CAG | 29 | 740813 | -2 |
| MXIM | 32 | 504696 | 0 |
| WCG | 46 | 2186486 | 4 |
| Average | 34 | 994790 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $995 million. That figure was $689 million in MGA’s case. WellCare Health Plans, Inc. (NYSE:WCG) is the most popular stock in this table. On the other hand Dover Corporation (NYSE:DOV) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Magna International Inc. (NYSE:MGA) is even less popular than DOV. Hedge funds dodged a bullet by taking a bearish stance towards MGA. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately MGA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MGA investors were disappointed as the stock returned -40.6% 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 so far 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.
