A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Marcus & Millichap Inc (NYSE:MMI) during the quarter.
Marcus & Millichap Inc (NYSE:MMI) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. The market response towards the stock was flat throughout the second quarter, with the stock losing 0.33% value during the quarter. In order to understand the hedge fund sentiment surrounding Marcus & Millichap Inc (NYSE:MMI), we will discuss hedge funds that held stakes in the company, at the end of September.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Enbridge Energy Management, L.L.C. (NYSE:EEQ), Rexnord Corp (NYSE:RXN), and Ligand Pharmaceuticals Inc. (NASDAQ:LGND) to gather more data points.
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According to most investors, hedge funds are perceived as underperforming, outdated financial tools of the past. While there are more than 8000 funds in operation today, our experts choose to focus on the moguls of this club, approximately 700 funds. Most estimates calculate that this group of people preside over most of all hedge funds’ total asset base, and by observing their best investments, Insider Monkey has formulated various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Now, we’re going to view the recent action surrounding Marcus & Millichap Inc (NYSE:MMI).
Hedge fund activity in Marcus & Millichap Inc (NYSE:MMI)
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 22% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Heebner’s Capital Growth Management has the biggest position in Marcus & Millichap Inc (NYSE:MMI), worth close to $30.3 million, amounting to 1% of its total 13F portfolio. Coming in second is Lee Munder Capital Group, led by Lee Munder, holding a $14.7 million position; 0.3% of its 13F portfolio is allocated to the stock. Other peers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Robert B. Gillam’s McKinley Capital Management, and Chuck Royce’s Royce & Associates.
Due to the fact that Marcus & Millichap Inc (NYSE:MMI) has witnessed a bearish sentiment from hedge fund managers, we can see that there were a few hedgies that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Renaissance Technologies sold off the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $5.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $3.8 million worth of shares. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Marcus & Millichap Inc (NYSE:MMI). We will take a look at Enbridge Energy Management, L.L.C. (NYSE:EEQ), Rexnord Corp (NYSE:RXN), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and Select Income REIT (NYSE:SIR). This group of stocks’ market values resemble Marcus & Millichap Inc (NYSE:MMI)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EEQ | 7 | 27263 | -3 |
| RXN | 17 | 166220 | 1 |
| LGND | 16 | 210066 | -3 |
| SIR | 14 | 86926 | -2 |
As you can see, these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $70 million in Marcus & Millichap Inc (NYSE:MMI)’s case. Rexnord Corp (NYSE:RXN) is the most popular stock in this table. On the other hand, Enbridge Energy Management, L.L.C. (NYSE:EEQ) is the least popular one with only 7 bullish hedge fund positions. Marcus & Millichap Inc (NYSE:MMI) 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. In this regard, Rexnord Corp (NYSE:RXN) might be a better candidate to consider a long position.
