Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Matson, Inc. (NYSE:MATX) an excellent stock to buy now? The smart money is getting less optimistic. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that MATX isn’t among the 30 most popular stocks among hedge funds (see the video below). MATX was in 8 hedge funds’ portfolios at the end of the second quarter of 2019. There were 9 hedge funds in our database with MATX positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the latest hedge fund action surrounding Matson, Inc. (NYSE:MATX).
What does smart money think about Matson, Inc. (NYSE:MATX)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MATX over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Matson, Inc. (NYSE:MATX), which was worth $2.8 million at the end of the second quarter. On the second spot was D E Shaw which amassed $1.9 million worth of shares. Moreover, Citadel Investment Group, Weld Capital Management, and Two Sigma Advisors were also bullish on Matson, Inc. (NYSE:MATX), allocating a large percentage of their portfolios to this stock.
Due to the fact that Matson, Inc.(NYSE:MATX) has witnessed bearish sentiment from the smart money, it’s easy to see that there were a few fund managers who were dropping their full holdings in the second quarter. Intriguingly, Renaissance Technologies dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth close to $1.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $0.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Matson, Inc. (NYSE:MATX) but similarly valued. These stocks are Antero Resources Corporation (NYSE:AR), Trinseo S.A. (NYSE:TSE), Federal Signal Corporation (NYSE:FSS), and Axos Financial, Inc. (NYSE:AX). This group of stocks’ market values are closest to MATX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AR | 30 | 638778 | 3 |
| TSE | 23 | 115515 | 4 |
| FSS | 20 | 52902 | 0 |
| AX | 14 | 49005 | 1 |
| Average | 21.75 | 214050 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $6 million in MATX’s case. Antero Resources Corporation (NYSE:AR) is the most popular stock in this table. On the other hand Axos Financial, Inc. (NYSE:AX) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Matson, Inc. (NYSE:MATX) is even less popular than AX. Hedge funds dodged a bullet by taking a bearish stance towards MATX. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MATX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MATX investors were disappointed as the stock returned -2.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
