A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on MSCI Inc (NYSE:MSCI).
Is MSCI stock a buy or sell? MSCI Inc (NYSE:MSCI) shareholders have witnessed a decrease in hedge fund sentiment of late. MSCI Inc (NYSE:MSCI) was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 47. Our calculations also showed that MSCI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Gabriel Plotkin of Melvin Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s review the key hedge fund action surrounding MSCI Inc (NYSE:MSCI).
Do Hedge Funds Think MSCI Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 42 hedge funds held shares or bullish call options in MSCI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Melvin Capital Management was the largest shareholder of MSCI Inc (NYSE:MSCI), with a stake worth $200.9 million reported as of the end of December. Trailing Melvin Capital Management was Holocene Advisors, which amassed a stake valued at $113.4 million. Echo Street Capital Management, Fundsmith LLP, and Fisher Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kadensa Capital allocated the biggest weight to MSCI Inc (NYSE:MSCI), around 11.72% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, setting aside 3.63 percent of its 13F equity portfolio to MSCI.
Since MSCI Inc (NYSE:MSCI) has witnessed falling interest from hedge fund managers, logic holds that there was a specific group of money managers that decided to sell off their full holdings in the fourth quarter. It’s worth mentioning that Christopher Lyle’s SCGE Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $120.9 million in stock. James Parsons’s fund, Junto Capital Management, also sold off its stock, about $88 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds in the fourth quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MSCI Inc (NYSE:MSCI) but similarly valued. We will take a look at Brown-Forman Corporation (NYSE:BF), ING Groep N.V. (NYSE:ING), Sempra Energy (NYSE:SRE), Eni SpA (NYSE:E), Fiat Chrysler Automobiles NV (NYSE:FCAU), CoStar Group Inc (NASDAQ:CSGP), and Agilent Technologies Inc. (NYSE:A). All of these stocks’ market caps are closest to MSCI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BF | 29 | 1575074 | -3 |
| ING | 9 | 397074 | 0 |
| SRE | 33 | 778325 | 1 |
| E | 4 | 42161 | -1 |
| FCAU | 15 | 223893 | -5 |
| CSGP | 51 | 2882489 | -4 |
| A | 45 | 3507911 | 6 |
| Average | 26.6 | 1343847 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $1344 million. That figure was $985 million in MSCI’s case. CoStar Group Inc (NASDAQ:CSGP) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. MSCI Inc (NYSE:MSCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MSCI is 64.5. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately MSCI wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on MSCI were disappointed as the stock returned -7.9% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Msci Inc. (NYSE:MSCI)
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Disclosure: None. This article was originally published at Insider Monkey.
