Should You Avoid MakeMyTrip Limited (MMYT)?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

MakeMyTrip Limited (NASDAQ:MMYT) was in 12 hedge funds’ portfolios at the end of September. MMYT investors should pay attention to a decrease in enthusiasm from smart money lately. There were 13 hedge funds in our database with MMYT holdings at the end of the previous quarter. 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 Select Comfort Corp. (NASDAQ:SCSS), Mercury Systems Inc (NASDAQ:MRCY), and Luminex Corporation (NASDAQ:LMNX) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Hedge fund activity in MakeMyTrip Limited (NASDAQ:MMYT)

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, down by 8% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in MMYT heading into this year. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Daniel Gold’s QVT Financial has the largest position in MakeMyTrip Limited (NASDAQ:MMYT), worth close to $39.6 million, accounting for 1.5% of its total 13F portfolio. The second most bullish fund manager is GMT Capital, led by Thomas E. Claugus, which holds a $33.3 million position. Remaining members of the smart money that are bullish encompass Shashin Shah’s Think Investments, Michael Pausic’s Foxhaven Asset Management and George Soros’ Soros Fund Management. We should note that two of these hedge funds (Think Investments and Soros Fund Management) are 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.

Seeing as MakeMyTrip Limited (NASDAQ:MMYT) has sustained falling interest from hedge fund managers, it’s safe to say that there were a few money managers who were dropping their positions entirely heading into Q4. It’s worth mentioning that Renaissance Technologies, one of the largest hedge funds in the world, got rid of the biggest stake of all the hedgies tracked by Insider Monkey, comprising close to $1.7 million in stock, and Guru Ramakrishnan’s Meru Capital was right behind this move, as the fund cut about $1.1 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MakeMyTrip Limited (NASDAQ:MMYT) but similarly valued. We will take a look at Select Comfort Corp. (NASDAQ:SCSS), Mercury Systems Inc (NASDAQ:MRCY), Luminex Corporation (NASDAQ:LMNX), and State Auto Financial (NASDAQ:STFC). All of these stocks’ market caps are closest to MMYT’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $157 million in MMYT’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand State Auto Financial (NASDAQ:STFC) is the least popular one with only 4 bullish hedge fund positions. MakeMyTrip Limited (NASDAQ:MMYT) 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 LMNX might be a better candidate to consider taking a long position in.

Disclosure: None