Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year through September 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Marine Products Corporation (NYSE:MPX).
Marine Products Corporation (NYSE:MPX) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. MPX was in 5 hedge funds’ portfolios at the end of June. There were 6 hedge funds in our database with MPX holdings at the end of the previous quarter. Our calculations also showed that MPX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are many signals stock traders put to use to assess their holdings. A duo of the best signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outclass the market by a significant margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the latest hedge fund action regarding Marine Products Corporation (NYSE:MPX).
What have hedge funds been doing with Marine Products Corporation (NYSE:MPX)?
At Q2’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in MPX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in Marine Products Corporation (NYSE:MPX), which was worth $13.4 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $3.6 million worth of shares. Moreover, Arrowstreet Capital, Zebra Capital Management, and Millennium Management were also bullish on Marine Products Corporation (NYSE:MPX), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PDT Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified MPX as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Marine Products Corporation (NYSE:MPX) but similarly valued. We will take a look at Agilysys, Inc. (NASDAQ:AGYS), Ducommun Incorporated (NYSE:DCO), Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT), and AquaVenture Holdings Limited (NYSE:WAAS). This group of stocks’ market values are closest to MPX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGYS | 13 | 122986 | -1 |
| DCO | 11 | 68597 | 2 |
| SBT | 6 | 15458 | -1 |
| WAAS | 9 | 20008 | -1 |
| Average | 9.75 | 56762 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $18 million in MPX’s case. Agilysys, Inc. (NASDAQ:AGYS) is the most popular stock in this table. On the other hand Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Marine Products Corporation (NYSE:MPX) is even less popular than SBT. Hedge funds dodged a bullet by taking a bearish stance towards MPX. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MPX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MPX investors were disappointed as the stock returned -7.5% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
