Is MGNI Stock A Buy or Sell?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Magnite Inc. (NASDAQ:MGNI).

Is MGNI stock a buy? Magnite Inc. (NASDAQ:MGNI) investors should be aware of an increase in hedge fund sentiment of late. Magnite Inc. (NASDAQ:MGNI) was in 29 hedge funds’ portfolios at the end of December. The all time high for this statistic is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 25 hedge funds in our database with MGNI holdings at the end of September. Our calculations also showed that MGNI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.

Gavin Saitowitz of Prelude Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to take a look at the recent hedge fund action encompassing Magnite Inc. (NASDAQ:MGNI).

Do Hedge Funds Think MGNI Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in MGNI over the last 22 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Magnite Inc. (NASDAQ:MGNI) was held by Nine Ten Partners, which reported holding $73.9 million worth of stock at the end of December. It was followed by Driehaus Capital with a $58.7 million position. Other investors bullish on the company included Royce & Associates, Alta Park Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Magnite Inc. (NASDAQ:MGNI), around 11.11% of its 13F portfolio. P.A.W. CAPITAL PARTNERS is also relatively very bullish on the stock, designating 9.48 percent of its 13F equity portfolio to MGNI.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, assembled the most outsized position in Magnite Inc. (NASDAQ:MGNI). Driehaus Capital had $58.7 million invested in the company at the end of the quarter. Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital also initiated a $48.7 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Sheetal Sharma’s Collaborative Holdings Management, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Magnite Inc. (NASDAQ:MGNI) but similarly valued. These stocks are Alamos Gold Inc (NYSE:AGI), Viavi Solutions Inc (NASDAQ:VIAV), New Jersey Resources Corp (NYSE:NJR), PagerDuty, Inc. (NYSE:PD), Vir Biotechnology, Inc. (NASDAQ:VIR), TeleTech Holdings, Inc. (NASDAQ:TTEC), and Spectrum Brands Holdings, Inc. (NYSE:SPB). All of these stocks’ market caps match MGNI’s market cap.

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As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $361 million in MGNI’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand Vir Biotechnology, Inc. (NASDAQ:VIR) is the least popular one with only 5 bullish hedge fund positions. Magnite Inc. (NASDAQ:MGNI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGNI is 79. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on MGNI as the stock returned 29.7% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.