Magna International Inc. (MGA): Hedge Funds Are Snapping Up

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Magna International Inc. (NYSE:MGA) to find out whether there were any major changes in hedge funds’ views.

Magna International Inc. (NYSE:MGA) shareholders have witnessed an increase in hedge fund interest of late. Magna International Inc. (NYSE:MGA) was in 39 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 43. Our calculations also showed that MGA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Cathie Wood of ARK Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the recent hedge fund action regarding Magna International Inc. (NYSE:MGA).

Do Hedge Funds Think MGA Is A Good Stock To Buy Now?

At the end of June, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MGA over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Moore Global Investments held the most valuable stake in Magna International Inc. (NYSE:MGA), which was worth $129.2 million at the end of the second quarter. On the second spot was GLG Partners which amassed $59 million worth of shares. Arrowstreet Capital, ARK Investment Management, and Masters Capital 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 Highline Capital Management allocated the biggest weight to Magna International Inc. (NYSE:MGA), around 8.22% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, setting aside 4.9 percent of its 13F equity portfolio to MGA.

As one would reasonably expect, key hedge funds were breaking ground themselves. Masters Capital Management, managed by Mike Masters, created the largest call position in Magna International Inc. (NYSE:MGA). Masters Capital Management had $46.3 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $22.5 million investment in the stock during the quarter. The other funds with brand new MGA positions are Anand Parekh’s Alyeska Investment Group, Peter Avellone’s Cartenna Capital, and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Magna International Inc. (NYSE:MGA) but similarly valued. We will take a look at Yum China Holdings, Inc. (NYSE:YUMC), Lufax Holding Ltd (NYSE:LU), Garmin Ltd. (NASDAQ:GRMN), Franco-Nevada Corporation (NYSE:FNV), Delta Air Lines, Inc. (NYSE:DAL), Arista Networks Inc (NYSE:ANET), and Eversource Energy (NYSE:ES). All of these stocks’ market caps are closest to MGA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $662 million. That figure was $576 million in MGA’s case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand Lufax Holding Ltd (NYSE:LU) is the least popular one with only 19 bullish hedge fund positions. Magna International Inc. (NYSE:MGA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGA is 70.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately MGA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MGA were disappointed as the stock returned -10% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.