The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Mesa Laboratories, Inc. (NASDAQ:MLAB) and find out how it is affected by hedge funds’ moves.
Mesa Laboratories, Inc. (NASDAQ:MLAB) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of September. At the end of this article we will also compare MLAB to other stocks including Victory Capital Holdings, Inc. (NASDAQ:VCTR), GasLog Ltd (NYSE:GLOG), and Southwestern Energy Company (NYSE:SWN) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the latest hedge fund action surrounding Mesa Laboratories, Inc. (NASDAQ:MLAB).
How are hedge funds trading Mesa Laboratories, Inc. (NASDAQ:MLAB)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in MLAB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Mesa Laboratories, Inc. (NASDAQ:MLAB), which was worth $56.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $19.1 million worth of shares. Marshall Wace, GLG Partners, and Winton 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 Royce & Associates allocated the biggest weight to Mesa Laboratories, Inc. (NASDAQ:MLAB), around 0.53% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to MLAB.
Due to the fact that Mesa Laboratories, Inc. (NASDAQ:MLAB) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their full holdings by the end of the third quarter. It’s worth mentioning that Brian Bares, Russell Mollen, and James Bradshaw’s Nine Ten Partners dumped the biggest position of the 750 funds followed by Insider Monkey, valued at about $10.8 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also sold off its stock, about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mesa Laboratories, Inc. (NASDAQ:MLAB) but similarly valued. These stocks are Victory Capital Holdings, Inc. (NASDAQ:VCTR), GasLog Ltd (NYSE:GLOG), Southwestern Energy Company (NYSE:SWN), and Innovative Industrial Properties, Inc. (NYSE:IIPR). This group of stocks’ market valuations are closest to MLAB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VCTR | 12 | 48212 | 0 |
| GLOG | 13 | 43502 | 0 |
| SWN | 14 | 144813 | -4 |
| IIPR | 15 | 50763 | 5 |
| Average | 13.5 | 71823 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $98 million in MLAB’s case. Innovative Industrial Properties, Inc. (NYSE:IIPR) is the most popular stock in this table. On the other hand Victory Capital Holdings, Inc. (NASDAQ:VCTR) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Mesa Laboratories, Inc. (NASDAQ:MLAB) is even less popular than VCTR. Hedge funds dodged a bullet by taking a bearish stance towards MLAB. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MLAB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MLAB investors were disappointed as the stock returned -1.5% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
