Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Moelis & Company (NYSE:MC) the right investment to pursue these days? The smart money is becoming more confident. The number of bullish hedge fund bets moved up by 3 in recent months. Our calculations also showed that MC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are dozens of methods shareholders use to size up publicly traded companies. A couple of the most underrated methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform the S&P 500 by a superb amount (see the details here).
David Keidan of Buckingham Capital
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. We’re going to view the recent hedge fund action regarding Moelis & Company (NYSE:MC).
Hedge fund activity in Moelis & Company (NYSE:MC)
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MC over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Moelis & Company (NYSE:MC) was held by Royce & Associates, which reported holding $14.7 million worth of stock at the end of September. It was followed by Marshall Wace with a $8.7 million position. Other investors bullish on the company included GLG Partners, Buckingham Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Buckingham Capital Management allocated the biggest weight to Moelis & Company (NYSE:MC), around 0.63% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.14 percent of its 13F equity portfolio to MC.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Marshall Wace, managed by Paul Marshall and Ian Wace, created the largest position in Moelis & Company (NYSE:MC). Marshall Wace had $8.7 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Moelis & Company (NYSE:MC) but similarly valued. We will take a look at Alexander & Baldwin Holdings Inc (NYSE:MATX), Revolve Group, Inc. (NYSE:RVLV), Dycom Industries, Inc. (NYSE:DY), and Corcept Therapeutics Incorporated (NASDAQ:CORT). All of these stocks’ market caps resemble MC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MATX | 10 | 5024 | 2 |
| RVLV | 14 | 49758 | -1 |
| DY | 17 | 56809 | 0 |
| CORT | 18 | 135196 | 1 |
| Average | 14.75 | 61697 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $64 million in MC’s case. Corcept Therapeutics Incorporated (NASDAQ:CORT) is the most popular stock in this table. On the other hand Alexander & Baldwin Holdings Inc (NYSE:MATX) is the least popular one with only 10 bullish hedge fund positions. Moelis & Company (NYSE:MC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MC were disappointed as the stock returned 1.8% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.
