Is Modine Manufacturing Co. (MOD) Going to Burn These Hedge Funds?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility 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) has seen an increase in support from the world’s most elite money managers recently. At the end of this article we will also compare MOD to other stocks including Credit Suisse AG- VelocityShares Daily Inverse VIX Short Term Etn (NASDAQ:XIV), Karyopharm Therapeutics Inc (NASDAQ:KPTI), and Davids Tea Inc (NASDAQ:DTEA) to get a better sense of its popularity.

In today’s marketplace there are tons of gauges stock traders use to size up their stock investments. Some of the most under-the-radar gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best fund managers can outclass the S&P 500 by a significant margin (see the details here).

With all of this in mind, we’re going to take a glance at the latest action regarding Modine Manufacturing Co. (NYSE:MOD).

What does the smart money think about Modine Manufacturing Co. (NYSE:MOD)?

At the Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Mario Gabelli’s GAMCO Investors has the biggest position in Modine Manufacturing Co. (NYSE:MOD), worth close to $13.8 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund is Peter Schliemann’s Rutabaga Capital Management, with a $11.4 million position; 1.4% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw.

As one would reasonably expect, key hedge funds were breaking ground themselves. Whitebox Advisors, managed by Andy Redleaf, initiated the largest position in Modine Manufacturing Co. (NYSE:MOD). Whitebox Advisors had $2.1 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Modine Manufacturing Co. (NYSE:MOD). We will take a look at Credit Suisse AG- VelocityShares Daily Inverse VIX Short Term Etn (NASDAQ:XIV), Karyopharm Therapeutics Inc (NASDAQ:KPTI), Davids Tea Inc (NASDAQ:DTEA), and NewStar Financial Inc (NASDAQ:NEWS). This group of stocks’ market caps resemble MOD’s market cap.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $50 million, compared to $40 million in MOD’s case. Credit Suisse AG- VelocityShares Daily Inverse VIX Short Term Etn (NASDAQ:XIV) is the most popular stock in this table. On the other hand Davids Tea Inc (NASDAQ:DTEA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Modine Manufacturing Co. (NYSE:MOD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.