Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Mohawk Group Holdings, Inc. (NASDAQ:MWK)? The smart money sentiment can provide an answer to this question.
Mohawk Group Holdings, Inc. (NASDAQ:MWK) has experienced an increase in support from the world’s most elite money managers of late. Mohawk Group Holdings, Inc. (NASDAQ:MWK) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MWK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are numerous indicators shareholders use to value publicly traded companies. Two of the less utilized indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top investment managers can outpace their index-focused peers by a significant amount (see the details here).
Sander Gerber of Hudson Bay Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a gander at the fresh hedge fund action surrounding Mohawk Group Holdings, Inc. (NASDAQ:MWK).
What does smart money think about Mohawk Group Holdings, Inc. (NASDAQ:MWK)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in MWK a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sander Gerber’s Hudson Bay Capital Management has the number one position in Mohawk Group Holdings, Inc. (NASDAQ:MWK), worth close to $5.9 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, olding a $2.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers with similar optimism consist of Israel Englander’s Millennium Management, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) and . In terms of the portfolio weights assigned to each position Hudson Bay Capital Management allocated the biggest weight to Mohawk Group Holdings, Inc. (NASDAQ:MWK), around 0.09% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0027 percent of its 13F equity portfolio to MWK.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Prelude Capital (previously Springbok Capital), managed by Gavin Saitowitz and Cisco J. del Valle, initiated the largest position in Mohawk Group Holdings, Inc. (NASDAQ:MWK). Prelude Capital (previously Springbok Capital) had $0 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mohawk Group Holdings, Inc. (NASDAQ:MWK) but similarly valued. We will take a look at FS Bancorp, Inc. (NASDAQ:FSBW), Aurora Mobile Limited (NASDAQ:JG), Sky Solar Holdings, Ltd. (NASDAQ:SKYS), Taiwan Liposome Company, Ltd. (NASDAQ:TLC), Hertz Global Holdings, Inc. (NYSE:HTZ), Lifevantage Corporation (NASDAQ:LFVN), and Cerecor Inc. (NASDAQ:CERC). This group of stocks’ market valuations match MWK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FSBW | 5 | 11860 | 1 |
| JG | 1 | 389 | 0 |
| SKYS | 1 | 426 | 0 |
| TLC | 1 | 167 | 0 |
| HTZ | 8 | 2761 | -4 |
| LFVN | 7 | 18068 | -2 |
| CERC | 9 | 93518 | -2 |
| Average | 4.6 | 18170 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $9 million in MWK’s case. Cerecor Inc. (NASDAQ:CERC) is the most popular stock in this table. On the other hand Aurora Mobile Limited (NASDAQ:JG) is the least popular one with only 1 bullish hedge fund positions. Mohawk Group Holdings, Inc. (NASDAQ:MWK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MWK is 54.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately MWK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MWK investors were disappointed as the stock returned -10.3% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
