Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Monro Muffler Brake Inc (NASDAQ:MNRO) .
Monro Muffler Brake Inc (NASDAQ:MNRO) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. 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 Golar LNG Limited (USA) (NASDAQ:GLNG), Parkway Properties Inc (NYSE:PKY), and Granite Construction Inc. (NYSE:GVA) to gather more data points.
Follow Monro Inc. (NASDAQ:MNRO)
Follow Monro Inc. (NASDAQ:MNRO)
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.
Ollyy/Shutterstock.com
Hedge fund activity in Monro Muffler Brake Inc (NASDAQ:MNRO)
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MNRO over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Akre Capital Management, led by Charles Akre, holds the biggest position in Monro Muffler Brake Inc (NASDAQ:MNRO). Akre Capital Management has a $92.2 million position in the stock, comprising 1.8% of its 13F portfolio. On Akre Capital Management’s heels is Chuck Royce of Royce & Associates, with a $49.1 million position. Remaining hedge funds and institutional investors that hold long positions consist of Mariko Gordon’s Daruma Asset Management, David Keidan’s Buckingham Capital Management and Charles Clough’s Clough Capital Partners. 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.
Seeing as Monro Muffler Brake Inc (NASDAQ:MNRO) has sustained bearish sentiment from the aggregate hedge fund industry, we can see that there were a few money managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Steve Cohen’s Point72 Asset Management cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $8.4 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $1.6 million worth.
Let’s also examine hedge fund activity in other stocks similar to Monro Muffler Brake Inc (NASDAQ:MNRO). We will take a look at Golar LNG Limited (USA) (NASDAQ:GLNG), Parkway Properties Inc (NYSE:PKY), Granite Construction Inc. (NYSE:GVA), and American Assets Trust, Inc (NYSE:AAT). This group of stocks’ market valuations are closest to MNRO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLNG | 25 | 401523 | 5 |
| PKY | 11 | 67753 | -2 |
| GVA | 13 | 96846 | 0 |
| AAT | 6 | 144693 | -5 |
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 $178 million. That figure was $216 million in MNRO’s case. Golar LNG Limited (USA) (NASDAQ:GLNG) is the most popular stock in this table. On the other hand American Assets Trust, Inc (NYSE:AAT) is the least popular one with only 6 bullish hedge fund positions. Monro Muffler Brake Inc (NASDAQ:MNRO) 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 GLNG might be a better candidate to consider taking a long position in.
Disclosure: None
