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 fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 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 Mistras Group, Inc. (NYSE:MG).
Is Mistras Group, Inc. (NYSE:MG) undervalued? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets fell by 1 recently. Our calculations also showed that MG isn’t among the 30 most popular stocks among hedge funds. MG was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 13 hedge funds in our database with MG positions at the end of the previous quarter.
In today’s marketplace there are many indicators stock traders put to use to grade stocks. A couple of the best indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite investment managers can beat the market by a very impressive amount (see the details here).
We’re going to take a glance at the key hedge fund action encompassing Mistras Group, Inc. (NYSE:MG).
Hedge fund activity in Mistras Group, Inc. (NYSE:MG)
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in MG over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Rutabaga Capital Management was the largest shareholder of Mistras Group, Inc. (NYSE:MG), with a stake worth $9.7 million reported as of the end of December. Trailing Rutabaga Capital Management was Engine Capital, which amassed a stake valued at $6 million. Renaissance Technologies, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Mistras Group, Inc. (NYSE:MG) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedge funds that slashed their positions entirely in the third quarter. Interestingly, Mark Lee’s Forest Hill Capital dropped the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $2.3 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dumped about $0 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Mistras Group, Inc. (NYSE:MG). We will take a look at Harmonic Inc (NASDAQ:HLIT), GlycoMimetics, Inc. (NASDAQ:GLYC), Financial Institutions, Inc. (NASDAQ:FISI), and Vishay Precision Group Inc (NYSE:VPG). All of these stocks’ market caps resemble MG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLIT | 13 | 59986 | 1 |
| GLYC | 10 | 38363 | 0 |
| FISI | 10 | 35681 | -2 |
| VPG | 13 | 114264 | -2 |
| Average | 11.5 | 62074 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $29 million in MG’s case. Harmonic Inc (NASDAQ:HLIT) is the most popular stock in this table. On the other hand GlycoMimetics, Inc. (NASDAQ:GLYC) is the least popular one with only 10 bullish hedge fund positions. Mistras Group, Inc. (NYSE:MG) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MG wasn’t nearly as popular as these 15 stock and hedge funds that were betting on MG were disappointed as the stock returned -2.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
