How Did Hedge Funds’ Mohawk Industries, Inc. (MHK) Bets Fare?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Mohawk Industries, Inc. (NYSE:MHK) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Mohawk Industries, Inc. (NYSE:MHK) a sound investment right now? Prominent investors were getting less optimistic. The number of bullish hedge fund positions went down by 6 lately. Mohawk Industries, Inc. (NYSE:MHK) was in 38 hedge funds’ portfolios at the end of September. The all time high for this statistic is 64. Our calculations also showed that MHK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

John Rogers of Ariel Investments

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a look at the key hedge fund action surrounding Mohawk Industries, Inc. (NYSE:MHK).

Do Hedge Funds Think MHK Is A Good Stock To Buy Now?

At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards MHK over the last 25 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Mohawk Industries, Inc. (NYSE:MHK), which was worth $282.1 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $233.6 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and AQR 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 SAYA Management allocated the biggest weight to Mohawk Industries, Inc. (NYSE:MHK), around 5.8% of its 13F portfolio. Scopia Capital is also relatively very bullish on the stock, earmarking 5.57 percent of its 13F equity portfolio to MHK.

Seeing as Mohawk Industries, Inc. (NYSE:MHK) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, James Parsons’s Junto Capital Management dropped the largest position of all the hedgies followed by Insider Monkey, comprising close to $32.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $17.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mohawk Industries, Inc. (NYSE:MHK) but similarly valued. We will take a look at GFL Environmental Inc. (NYSE:GFL), Equitable Holdings, Inc. (NYSE:EQH), DaVita Inc (NYSE:DVA), Annaly Capital Management, Inc. (NYSE:NLY), Jack Henry & Associates, Inc. (NASDAQ:JKHY), Ares Management Corp (NYSE:ARES), and Pentair plc (NYSE:PNR). This group of stocks’ market valuations match MHK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $1297 million. That figure was $1263 million in MHK’s case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 15 bullish hedge fund positions. Mohawk Industries, Inc. (NYSE:MHK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MHK is 53.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, MHK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MHK were disappointed as the stock returned -11% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

Suggested Articles:

• 15 Most Powerful Weapons In The World
• 15 Biggest E-Commerce Companies in China
• 15 Largest Beverage Companies by Market Cap

Disclosure: None. This article was originally published at Insider Monkey.

Follow Insider Monkey on Twitter