The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Marine Products Corp. (NYSE:MPX), and what that likely means for the prospects of the company and its stock.
Marine Products Corp. (NYSE:MPX) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare MPX to other stocks including Hemisphere Media Group Inc (NASDAQ:HMTV), Primo Water Corporation (NASDAQ:PRMW), and REX American Resources Corp (NYSE:REX) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Roger Ibbotson of Zebra Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s view the recent hedge fund action surrounding Marine Products Corp. (NYSE:MPX).
How are hedge funds trading Marine Products Corp. (NYSE:MPX)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MPX over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Marine Products Corp. (NYSE:MPX), with a stake worth $11.3 million reported as of the end of September. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $3.4 million. Arrowstreet Capital, Millennium Management, and Zebra Capital Management 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 Zebra Capital Management allocated the biggest weight to Marine Products Corp. (NYSE:MPX), around 0.24% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.09 percent of its 13F equity portfolio to MPX.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Marine Products Corp. (NYSE:MPX) but similarly valued. We will take a look at Hemisphere Media Group Inc (NASDAQ:HMTV), Primo Water Corporation (NASDAQ:PRMW), REX American Resources Corp (NYSE:REX), and Paysign, Inc. (NASDAQ:PAYS). This group of stocks’ market values are similar to MPX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HMTV | 7 | 36695 | -1 |
| PRMW | 17 | 106864 | 5 |
| REX | 8 | 43699 | 0 |
| PAYS | 11 | 30078 | 3 |
| Average | 10.75 | 54334 | 1.75 |
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 $54 million. That figure was $16 million in MPX’s case. Primo Water Corporation (NASDAQ:PRMW) is the most popular stock in this table. On the other hand Hemisphere Media Group Inc (NASDAQ:HMTV) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Marine Products Corp. (NYSE:MPX) is even less popular than HMTV. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MPX, though not to the same extent, as the stock returned 8.5% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
