Is MKTX Stock A Buy or Sell?

In this article we will take a look at whether hedge funds think MarketAxess Holdings Inc. (NASDAQ:MKTX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is MKTX stock a buy or sell? MarketAxess Holdings Inc. (NASDAQ:MKTX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 34 hedge funds’ portfolios at the end of the fourth quarter of 2020. Our calculations also showed that MKTX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). 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 MongoDB, Inc. (NASDAQ:MDB), Baker Hughes Company (NYSE:BKR), and Kellogg Company (NYSE:K) to gather more data points.

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.

Cathie Wood of ARK Investment Management

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. Keeping this in mind let’s review the latest hedge fund action encompassing MarketAxess Holdings Inc. (NASDAQ:MKTX).

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

At Q4’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MKTX over the last 22 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in MarketAxess Holdings Inc. (NASDAQ:MKTX), which was worth $407.9 million at the end of the fourth quarter. On the second spot was GuardCap Asset Management which amassed $182.3 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and GLG Partners 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 Lakehouse Capital allocated the biggest weight to MarketAxess Holdings Inc. (NASDAQ:MKTX), around 4.46% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, earmarking 3.72 percent of its 13F equity portfolio to MKTX.

Judging by the fact that MarketAxess Holdings Inc. (NASDAQ:MKTX) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers who were dropping their full holdings by the end of the fourth quarter. At the top of the heap, D. E. Shaw’s D E Shaw dropped the biggest position of the 750 funds followed by Insider Monkey, comprising about $15.5 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also cut its stock, about $2 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MarketAxess Holdings Inc. (NASDAQ:MKTX) but similarly valued. These stocks are MongoDB, Inc. (NASDAQ:MDB), Baker Hughes Company (NYSE:BKR), Kellogg Company (NYSE:K), Telefonica S.A. (NYSE:TEF), Magna International Inc. (NYSE:MGA), Altice USA, Inc. (NYSE:ATUS), and CBRE Group, Inc. (NYSE:CBRE). This group of stocks’ market caps are similar to MKTX’s market cap.

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As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1519 million. That figure was $946 million in MKTX’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. MarketAxess Holdings Inc. (NASDAQ:MKTX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MKTX is 63.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 7.9% in 2021 through April 1st and surpassed the market again by 0.4 percentage points. Unfortunately MKTX wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); MKTX investors were disappointed as the stock returned -8.7% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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