We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Miller Industries, Inc. (NYSE:MLR).
Miller Industries, Inc. (NYSE:MLR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the second quarter of 2019. At the end of this article we will also compare MLR to other stocks including Citizens & Northern Corporation (NASDAQ:CZNC), Neptune Wellness Solutions Inc. (NASDAQ:NEPT), and KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) 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.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let’s take a look at the latest hedge fund action encompassing Miller Industries, Inc. (NYSE:MLR).
Hedge fund activity in Miller Industries, Inc. (NYSE:MLR)
At Q2’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in MLR a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Miller Industries, Inc. (NYSE:MLR), worth close to $38.7 million, corresponding to 0.3% of its total 13F portfolio. On Royce & Associates’s heels is Renaissance Technologies, with a $3.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions contain Jack Ripsteen’s Potrero Capital Research, Joe Huber’s Huber Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Due to the fact that Miller Industries, Inc. (NYSE:MLR) has faced declining sentiment from the smart money, we can see that there lies a certain “tier” of hedge funds who sold off their positions entirely heading into Q3. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $2 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also said goodbye to its stock, about $0 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Miller Industries, Inc. (NYSE:MLR). These stocks are Citizens & Northern Corporation (NASDAQ:CZNC), Neptune Wellness Solutions Inc. (NASDAQ:NEPT), KalVista Pharmaceuticals, Inc. (NASDAQ:KALV), and Fiesta Restaurant Group Inc (NASDAQ:FRGI). This group of stocks’ market valuations are similar to MLR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CZNC | 2 | 7044 | -1 |
| NEPT | 8 | 32369 | 0 |
| KALV | 15 | 118797 | -4 |
| FRGI | 14 | 118168 | -4 |
| Average | 9.75 | 69095 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $52 million in MLR’s case. KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) is the most popular stock in this table. On the other hand Citizens & Northern Corporation (NASDAQ:CZNC) is the least popular one with only 2 bullish hedge fund positions. Miller Industries, Inc. (NYSE:MLR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on MLR as the stock returned 8.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
