Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of MSCI Inc (NYSE:MSCI).
MSCI Inc (NYSE:MSCI) shareholders have witnessed a decrease in hedge fund sentiment recently. MSCI Inc (NYSE:MSCI) was in 37 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 47. There were 38 hedge funds in our database with MSCI positions at the end of the first quarter. Our calculations also showed that MSCI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Fisher of Fisher Asset 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 we’re going to analyze the key hedge fund action surrounding MSCI Inc (NYSE:MSCI).
Do Hedge Funds Think MSCI Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 44 hedge funds with a bullish position in MSCI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Greg Poole’s Echo Street Capital Management has the biggest position in MSCI Inc (NYSE:MSCI), worth close to $144.6 million, amounting to 1.1% of its total 13F portfolio. The second largest stake is held by Fundsmith LLP, led by Terry Smith, holding a $111.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism include Ken Fisher’s Fisher Asset Management, David Thomas’s Atalan Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Atalan Capital allocated the biggest weight to MSCI Inc (NYSE:MSCI), around 5.99% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, earmarking 3.36 percent of its 13F equity portfolio to MSCI.
Due to the fact that MSCI Inc (NYSE:MSCI) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of funds who were dropping their full holdings heading into Q3. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at an estimated $58.3 million in stock. James Parsons’s fund, Junto Capital Management, also sold off its stock, about $28.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MSCI Inc (NYSE:MSCI) but similarly valued. These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), Eni SpA (NYSE:E), Exelon Corporation (NASDAQ:EXC), Canadian Natural Resources Limited (NYSE:CNQ), Simon Property Group, Inc (NYSE:SPG), Wipro Limited (NYSE:WIT), and Aptiv PLC (NYSE:APTV). This group of stocks’ market valuations are closest to MSCI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMG | 35 | 3204586 | -6 |
| E | 3 | 69407 | -1 |
| EXC | 35 | 1194570 | -9 |
| CNQ | 27 | 777129 | -2 |
| SPG | 37 | 666243 | 6 |
| WIT | 14 | 164007 | 1 |
| APTV | 40 | 1677761 | -10 |
| Average | 27.3 | 1107672 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $1108 million. That figure was $773 million in MSCI’s case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 3 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 73.6. 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. 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 still beat the market by 4.4 percentage points. Hedge funds were also right about betting on MSCI as the stock returned 12.2% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Msci Inc. (NYSE:MSCI)
Follow Msci Inc. (NYSE:MSCI)
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Disclosure: None. This article was originally published at Insider Monkey.
