Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
In this article, we are going to take a closer look at the hedge fund sentiment towards MRC Global Inc (NYSE:MRC). The company saw a decline in popularity last quarter, as the number of funds tracked by Insider Monkey long MRC fell by two to 20. However, 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 Simmons First National Corporation (NASDAQ:SFNC), Spark Therapeutics Inc (NASDAQ:ONCE), and World Wrestling Entertainment, Inc. (NYSE:WWE) to gather more data points.
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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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With all of this in mind, we’re going to review the recent action regarding MRC Global Inc (NYSE:MRC).
Hedge fund activity in MRC Global Inc (NYSE:MRC)
At the end of the third quarter, a total of 20 funds tracked by Insider Monkey were long this stock, down by 9% from the second quarter of 2016. By comparison, 21 hedge funds held shares or bullish call options in MRC heading into 2016. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management has the largest position in MRC Global Inc (NYSE:MRC), worth close to $57.3 million, corresponding to 0.1% of its total 13F portfolio. On Millennium Management’s heels is D. E. Shaw’s D E Shaw, which holds a $41.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Dmitry Balyasny’s Balyasny Asset Management, and Joel Greenblatt’s Gotham Asset 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.
Judging by the fact that MRC Global Inc (NYSE:MRC) has weathered declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that elected to cut their positions entirely during the third quarter. Intriguingly, Brian Taylor’s Pine River Capital Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $0.2 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MRC Global Inc (NYSE:MRC) but similarly valued. These stocks are Simmons First National Corporation (NASDAQ:SFNC), Spark Therapeutics Inc (NASDAQ:ONCE), World Wrestling Entertainment, Inc. (NYSE:WWE), and Chesapeake Lodging Trust (NYSE:CHSP). This group of stocks’ market valuations match MRC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFNC | 6 | 9290 | 0 |
| ONCE | 13 | 194892 | -3 |
| WWE | 13 | 141372 | 3 |
| CHSP | 9 | 16402 | 0 |
As you can see these stocks had an average of 10 funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $231 million in MRC’s case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only six investors holding shares. Compared to these stocks MRC Global Inc (NYSE:MRC) 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.
