What Do Hedge Funds Think About Mohawk Industries, Inc. (MHK)?

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Mohawk Industries, Inc. (NYSE:MHK) makes for a good investment right now.

Mohawk Industries, Inc. (NYSE:MHK) has seen a decrease in hedge fund sentiment in recent months. Mohawk Industries, Inc. (NYSE:MHK) was in 36 hedge funds’ portfolios at the end of March. The all time high for this statistic is 64. There were 39 hedge funds in our database with MHK positions at the end of the fourth quarter. Our calculations also showed that MHK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers of Ariel Investments

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. With all of this in mind let’s go over the latest hedge fund action regarding Mohawk Industries, Inc. (NYSE:MHK).

Do Hedge Funds Think MHK Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MHK over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Mohawk Industries, Inc. (NYSE:MHK), which was worth $323.9 million at the end of the fourth quarter. On the second spot was Ariel Investments which amassed $241.7 million worth of shares. Arrowstreet Capital, Select Equity Group, and AQR 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 Scopia Capital allocated the biggest weight to Mohawk Industries, Inc. (NYSE:MHK), around 7.59% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, earmarking 4.77 percent of its 13F equity portfolio to MHK.

Since Mohawk Industries, Inc. (NYSE:MHK) has faced falling interest from the smart money, it’s safe to say that there exists a select few money managers who sold off their full holdings in the first quarter. Interestingly, John Smith Clark’s Southpoint Capital Advisors said goodbye to the largest position of all the hedgies watched by Insider Monkey, totaling close to $21.1 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund said goodbye to about $15.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Mohawk Industries, Inc. (NYSE:MHK). We will take a look at Tenaris S.A. (NYSE:TS), Novavax, Inc. (NASDAQ:NVAX), W.R. Berkley Corporation (NYSE:WRB), Telefonica Brasil SA (NYSE:VIV), Diamondback Energy Inc (NASDAQ:FANG), GameStop Corp. (NYSE:GME), and Fortune Brands Home & Security Inc (NYSE:FBHS). This group of stocks’ market valuations match MHK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $1297 million in MHK’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 9 bullish hedge fund positions. Mohawk Industries, Inc. (NYSE:MHK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MHK is 65.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately MHK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MHK were disappointed as the stock returned 1.8% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.