Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility and underperformance. The time period between the end of June 2015 and the end of June 2016 was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have been underperforming the large-cap indices. However, things have dramatically changed over the last 5 months. Small-cap stocks reversed their misfortune and beat the large cap indices by almost 11 percentage points since the end of June. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Michaels Companies Inc (NASDAQ:MIK).
Is Michaels Companies Inc (NASDAQ:MIK) a marvelous stock to buy now? Prominent investors are getting more optimistic. The number of bullish hedge fund bets improved by 1 recently. 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 Flowserve Corporation (NYSE:FLS), Brookfield Property Partners LP (NYSE:BPY), and NetSuite Inc (NYSE:N) to gather more data points.
Follow Michaels Companies Inc. (NASDAQ:MIK)
Follow Michaels Companies Inc. (NASDAQ:MIK)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Pressmaster/Shutterstock.com
Now, we’re going to take a look at the new action surrounding Michaels Companies Inc (NASDAQ:MIK).
How are hedge funds trading Michaels Companies Inc (NASDAQ:MIK)?
Heading into the fourth quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 5% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Highfields Capital Management, run by Jonathon Jacobson, holds the number one position in Michaels Companies Inc (NASDAQ:MIK). According to regulatory filings, the fund has a $267.2 million position in the stock, comprising 2.5% of its 13F portfolio. The second largest stake is held by Scott Ferguson of Sachem Head Capital, with a $71.7 million position; 3.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism comprise Ken Griffin’s Citadel Investment Group, John Tompkins’s Tyvor Capital and Paul Marshall and Ian Wace’s Marshall Wace LLP.
As aggregate interest increased, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in Michaels Companies Inc (NASDAQ:MIK). The fund reportedly had $42.2 million invested in the company at the end of the quarter. Adam Weiss’s Stillwater Investment Management also made a $12.1 million investment in the stock during the quarter. The following funds were also among the new MIK investors: George Hall’s Clinton Group, Israel Englander’s Millennium Management, and Neil Chriss’s Hutchin Hill Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Michaels Companies Inc (NASDAQ:MIK). We will take a look at Flowserve Corporation (NYSE:FLS), Brookfield Property Partners LP (NYSE:BPY), NetSuite Inc (NYSE:N), and ASML Holding N.V. (ADR) (NASDAQ:ASML). All of these stocks’ market caps are similar to MIK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLS | 26 | 402485 | -6 |
| BPY | 5 | 33485 | -1 |
| N | 25 | 479178 | 7 |
| ASML | 10 | 169469 | 2 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $510 million in MIK’s case. Flowserve Corporation (NYSE:FLS) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NYSE:BPY) is the least popular one with only 5 bullish hedge fund positions. Michaels Companies Inc (NASDAQ:MIK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FLS might be a better candidate to consider a long position.
Disclosure: none.
