Is MHK Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards Mohawk Industries, Inc. (NYSE:MHK) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is MHK stock a buy or sell? Hedge funds were in a bearish mood. The number of bullish hedge fund bets decreased by 2 in recent months. Mohawk Industries, Inc. (NYSE:MHK) was in 39 hedge funds’ portfolios at the end of December. The all time high for this statistic is 64. Our calculations also showed that MHK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 41 hedge funds in our database with MHK positions at the end of the third quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers of Ariel Investments

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy 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. Now we’re going to analyze the recent hedge fund action surrounding Mohawk Industries, Inc. (NYSE:MHK).

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

At the end of December, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the third quarter of 2020. By comparison, 40 hedge funds held shares or bullish call options in MHK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mohawk Industries, Inc. (NYSE:MHK) was held by Pzena Investment Management, which reported holding $267.6 million worth of stock at the end of December. It was followed by Ariel Investments with a $172 million position. Other investors bullish on the company included Arrowstreet Capital, Select Equity Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position MD Sass allocated the biggest weight to Mohawk Industries, Inc. (NYSE:MHK), around 4.74% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, earmarking 2.62 percent of its 13F equity portfolio to MHK.

Because Mohawk Industries, Inc. (NYSE:MHK) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds who were dropping their positions entirely by the end of the fourth quarter. At the top of the heap, Robert Bishop’s Impala Asset Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, totaling close to $11.8 million in stock. Wayne Cooperman’s fund, Cobalt Capital Management, also cut its stock, about $3.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mohawk Industries, Inc. (NYSE:MHK) but similarly valued. These stocks are Quanta Services Inc (NYSE:PWR), Globe Life Inc. (NYSE:GL), Morningstar, Inc. (NASDAQ:MORN), Fastly, Inc. (NYSE:FSLY), Molson Coors Beverage Company (NYSE:TAP), Algonquin Power & Utilities Corp. (NYSE:AQN), and Gaming and Leisure Properties Inc (NASDAQ:GLPI). This group of stocks’ market caps are closest to MHK’s market cap.

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As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $822 million. That figure was $987 million in MHK’s case. Molson Coors Beverage Company (NYSE:TAP) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 15 bullish hedge fund positions. Mohawk Industries, Inc. (NYSE:MHK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MHK is 71.3. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on MHK as the stock returned 30.4% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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