Is Maxwell Technologies Inc. (MXWL) A Good Stock To Buy?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Maxwell Technologies Inc. (NASDAQ:MXWL) has experienced a decrease in enthusiasm from smart money lately, which is not surprising, taking into account that the stock is down by over 17% year-to-date. 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 HORSEHEAD HOLDING CORP. (NASDAQ:ZINC), Hurco Companies, Inc. (NASDAQ:HURC), and Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG) to gather more data points.

To the average investor, there are plenty of metrics market participants have at their disposal to evaluate stocks. A pair of the most useful metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outperform the S&P 500 by a significant margin (see the details here).

Now, let’s view the latest action regarding Maxwell Technologies Inc. (NASDAQ:MXWL).

How have hedgies been trading Maxwell Technologies Inc. (NASDAQ:MXWL)?

At the end of the third quarter, a total of eight of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 33% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in Maxwell Technologies Inc. (NASDAQ:MXWL). Royce & Associates has a $7.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Levin Capital Strategies, led by John A. Levin, holding a $4.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism encompass Philip Hempleman’s Ardsley Partners, Paul Solit’s Potomac Capital Management, and Israel Englander’s Millennium Management.

Due to the fact that Maxwell Technologies Inc. (NASDAQ:MXWL) has experienced a declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Bernard Selz’s Selz Capital cut the largest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $1.7 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund dropped about $0.2 million worth of shares.

Let’s also examine hedge fund activity in other stocks similar to Maxwell Technologies Inc. (NASDAQ:MXWL). We will take a look at HORSEHEAD HOLDING CORP. (NASDAQ:ZINC), Hurco Companies, Inc. (NASDAQ:HURC), Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG), and VIVUS, Inc. (NASDAQ:VVUS). This group of stocks’ market valuations resemble MXWL’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $30 million, compared to $18 million in MXWL’s case. Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG) is the most popular stock in this table. On the other hand Hurco Companies, Inc. (NASDAQ:HURC) is the least popular one with only 7 bullish hedge fund positions. Maxwell Technologies Inc. (NASDAQ:MXWL) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BBRG might be a better candidate to consider a long position.