We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Modine Manufacturing Co. (NYSE:MOD) , and what that likely means for the prospects of the company and its stock.
Modine Manufacturing Co. (NYSE:MOD) shareholders have witnessed a decrease in support from the world’s most successful money managers of late. MOD was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 11 hedge funds in our database with MOD holdings at the end of the previous quarter. 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 Amarin Corporation plc (ADR) (NASDAQ:AMRN), TETRA Technologies, Inc. (NYSE:TTI), and Ashford Hospitality Trust, Inc. (NYSE:AHT) to gather more data points.
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.
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Now, let’s check out the latest action regarding Modine Manufacturing Co. (NYSE:MOD).
Hedge fund activity in Modine Manufacturing Co. (NYSE:MOD)
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 9% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in MOD at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli of GAMCO Investors holds the number one position in Modine Manufacturing Co. (NYSE:MOD). The fund reportedly has a $19.9 million position in the stock. The second most bullish fund manager is D E Shaw, one of the biggest hedge funds in the world, holding a $4.6 million position. Remaining members of the smart money that hold long positions include Jim Simons’ Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Robert B. Gillam’s McKinley Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Algert Coldiron Investors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified MOD as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Modine Manufacturing Co. (NYSE:MOD) but similarly valued. These stocks are Amarin Corporation plc (ADR) (NASDAQ:AMRN), TETRA Technologies, Inc. (NYSE:TTI), Ashford Hospitality Trust, Inc. (NYSE:AHT), and Great Southern Bancorp, Inc. (NASDAQ:GSBC). All of these stocks’ market caps match MOD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMRN | 19 | 221721 | 7 |
| TTI | 17 | 67275 | -6 |
| AHT | 13 | 27968 | -1 |
| GSBC | 6 | 11433 | -1 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $44 million in MOD’s case. Amarin Corporation plc (ADR) (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Great Southern Bancorp, Inc. (NASDAQ:GSBC) is the least popular one with only 6 bullish hedge fund positions. Modine Manufacturing Co. (NYSE:MOD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AMRN might be a better candidate to consider taking a long position in.
Disclosure: None
