As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Mechel PAO (NYSE:MTL).
Is MTL a good stock to buy? Mechel PAO (NYSE:MTL) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 6. MTL investors should be aware of a decrease in hedge fund interest recently. There were 4 hedge funds in our database with MTL positions at the end of the fourth quarter. Our calculations also showed that MTL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s view the recent hedge fund action encompassing Mechel PAO (NYSE:MTL).
Do Hedge Funds Think MTL Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MTL over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the largest position in Mechel PAO (NYSE:MTL). Renaissance Technologies has a $2.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $0.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Mechel PAO (NYSE:MTL), around 0.003% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0007 percent of its 13F equity portfolio to MTL.
Due to the fact that Mechel PAO (NYSE:MTL) has faced declining sentiment from hedge fund managers, we can see that there is a sect of hedgies that slashed their full holdings in the first quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest stake of all the hedgies watched by Insider Monkey, comprising about $0 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds in the first quarter.
Let’s now review hedge fund activity in other stocks similar to Mechel PAO (NYSE:MTL). These stocks are Puxin Limited (NYSE:NEW), Matrix Service Co (NASDAQ:MTRX), A-Mark Precious Metals, Inc. (NASDAQ:AMRK), Steel Partners Holdings LP (NYSE:SPLP), Radiant Logistics, Inc. (NYSE:RLGT), Covenant Logistics Group, Inc. (NASDAQ:CVLG), and FTS International, Inc. (NYSE:FTSI). This group of stocks’ market valuations resemble MTL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEW | 7 | 5983 | 1 |
| MTRX | 11 | 16230 | -5 |
| AMRK | 11 | 31890 | 5 |
| SPLP | 3 | 60288 | -1 |
| RLGT | 13 | 21325 | -3 |
| CVLG | 12 | 17495 | 0 |
| FTSI | 7 | 57533 | 2 |
| Average | 9.1 | 30106 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $3 million in MTL’s case. Radiant Logistics, Inc. (NYSE:RLGT) is the most popular stock in this table. On the other hand Steel Partners Holdings LP (NYSE:SPLP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Mechel PAO (NYSE:MTL) is even less popular than SPLP. Our overall hedge fund sentiment score for MTL is 19. 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. Hedge funds clearly dropped the ball on MTL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on MTL as the stock returned 35.3% since Q1 (through June 11th) and outperformed the market by an even larger margin.
Follow Mechel Pao (NYSE:MTL)
Follow Mechel Pao (NYSE:MTL)
Disclosure: None. This article was originally published at Insider Monkey.
