It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30th, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Mechel OAO (ADR) (NYSE:MTL).
Mechel OAO (ADR) (NYSE:MTL) investors should pay attention to an increase in hedge fund interest recently. Mechel was in 6 hedge funds’ portfolio at the end of the third quarter of 2015. There were 5 hedge funds in our database with Mechel OAO (ADR) (NYSE:MTL) holdings at the end of the previous quarter. At the end of this article, we will also compare Mechel OAO to other stocks including Primero Mining Corp (NYSE:PPP), Modine Manufacturing Co. (NYSE:MOD), and Credit Suisse AG- VelocityShares Daily Inverse VIX Short Term Etn (NASDAQ:XIV) to get a better sense of its popularity.
What does the smart money think about Mechel OAO (ADR) (NYSE:MTL)?
Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were bullish in this stock, an increase of 20% from the previous quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings significantly.
Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management had the number one position in Mechel OAO (ADR) (NYSE:MTL), worth close to $0.2 million, accounting for less than 0.1%% of its total 13F portfolio. This was a brand new position by the way. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain quant hedge funds Renaissance Technologies, Ken Griffin’s Citadel Investment Group and D E Shaw.
Let’s also review hedge fund activity in other stocks similar to Mechel OAO (ADR) (NYSE:MTL). These stocks are Primero Mining Corp (NYSE:PPP), Modine Manufacturing Co. (NYSE:MOD), Credit Suisse AG- VelocityShares Daily Inverse VIX Short Term Etn (NASDAQ:XIV), and Karyopharm Therapeutics Inc (NASDAQ:KPTI). This group of stocks’ market caps are closest to Mechel OAO (ADR) (NYSE:MTL)’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $36 million (vs. less than $1 million invested in MTL). Modine Manufacturing Co. (NYSE:MOD) is the most popular stock in this table. On the other hand Primero Mining Corp (NYSE:PPP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Mechel OAO (ADR) (NYSE:MTL) is even less popular than Primero Mining Corp (NYSE:PPP). Considering that hedge funds aren’t fond of this stock, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, it is also possible that they may not be very familiar with the bullish thesis. In either case more research is warranted.”