We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Mueller Industries, Inc. (NYSE:MLI) , and what that likely means for the prospects of the company and its stock.
Mueller Industries, Inc. (NYSE:MLI) shareholders have witnessed a decrease in hedge fund sentiment of late. MLI was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with MLI positions at the end of the previous quarter. At the end of this article we will also compare MLI to other stocks including Lithia Motors Inc (NYSE:LAD), Och-Ziff Capital Management Group LLC (NYSE:OZM), and DiamondRock Hospitality Company (NYSE:DRH) to get a better sense of its popularity.
Follow Mueller Industries Inc (NYSE:MLI)
Follow Mueller Industries Inc (NYSE:MLI)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Pavel L Photo and Video/Shutterstock.com
Keeping this in mind, let’s view the latest action surrounding Mueller Industries, Inc. (NYSE:MLI).
What have hedge funds been doing with Mueller Industries, Inc. (NYSE:MLI)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 6% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in MLI heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the number one position in Mueller Industries, Inc. (NYSE:MLI), worth close to $133.3 million, corresponding to 0.9% of its total 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, which holds a $41.6 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions contain Chuck Royce’s Royce & Associates, Jeffrey Gates’s Gates Capital Management and D. E. Shaw’s D E Shaw. We should note that Gates Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually cashed in their positions entirely. At the top of the heap, Joel Greenblatt’s Gotham Asset Management cashed in the biggest investment of all the investors tracked by Insider Monkey, totaling about $6.9 million in stock. George Hall’s fund, Clinton Group, also dumped its stock, about $0.6 million worth of Mueller Industries, Inc. (NYSE:MLI) shares.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mueller Industries, Inc. (NYSE:MLI) but similarly valued. We will take a look at Lithia Motors Inc (NYSE:LAD), Och-Ziff Capital Management Group LLC (NYSE:OZM), DiamondRock Hospitality Company (NYSE:DRH), and Community Bank System, Inc. (NYSE:CBU). All of these stocks’ market caps match MLI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAD | 20 | 328738 | -6 |
| OZM | 17 | 186191 | 1 |
| DRH | 12 | 49550 | -2 |
| CBU | 4 | 9911 | 2 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $250 million in MLI’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 4 bullish hedge fund positions. Mueller Industries, Inc. (NYSE:MLI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LAD might be a better candidate to consider taking a long position in.
Suggested Articles:
States With The Highest Domestic Violance Rates
Most Profitable Franchises To Buy in 2015
Most Affordable Countries To Live In Europe
Disclosure: None
