In this article we will check out the progression of hedge fund sentiment towards McGrath RentCorp (NASDAQ:MGRC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in McGrath RentCorp (NASDAQ:MGRC) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Employers Holdings, Inc. (NYSE:EIG), WSFS Financial Corporation (NASDAQ:WSFS), and OSI Systems, Inc. (NASDAQ:OSIS) to gather more data points. Our calculations also showed that MGRC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are plenty of methods market participants put to use to grade their stock investments. Two of the best methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top money managers can beat the S&P 500 by a solid margin (see the details here).
Peter Rathjens of Arrowstreet Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the recent hedge fund action encompassing McGrath RentCorp (NASDAQ:MGRC).
What have hedge funds been doing with McGrath RentCorp (NASDAQ:MGRC)?
At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in MGRC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of McGrath RentCorp (NASDAQ:MGRC), with a stake worth $18.6 million reported as of the end of September. Trailing Renaissance Technologies was Headlands Capital, which amassed a stake valued at $12.2 million. Royce & Associates, Marshall Wace LLP, and Arrowstreet Capital 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 Headlands Capital allocated the biggest weight to McGrath RentCorp (NASDAQ:MGRC), around 13.09% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, setting aside 1.64 percent of its 13F equity portfolio to MGRC.
Seeing as McGrath RentCorp (NASDAQ:MGRC) has witnessed falling interest from the smart money, we can see that there exists a select few hedgies who were dropping their full holdings in the first quarter. Interestingly, Donald Sussman’s Paloma Partners dropped the largest investment of the 750 funds tracked by Insider Monkey, worth close to $0.3 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $0.1 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as McGrath RentCorp (NASDAQ:MGRC) but similarly valued. These stocks are Employers Holdings, Inc. (NYSE:EIG), WSFS Financial Corporation (NASDAQ:WSFS), OSI Systems, Inc. (NASDAQ:OSIS), and Park National Corporation (NYSE:PRK). This group of stocks’ market values resemble MGRC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EIG | 10 | 52392 | -5 |
| WSFS | 12 | 99147 | -4 |
| OSIS | 15 | 12739 | -5 |
| PRK | 6 | 8226 | -4 |
| Average | 10.75 | 43126 | -4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $91 million in MGRC’s case. OSI Systems, Inc. (NASDAQ:OSIS) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks McGrath RentCorp (NASDAQ:MGRC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. Unfortunately MGRC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MGRC were disappointed as the stock returned 4.5% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
