Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like MKS Instruments, Inc. (NASDAQ:MKSI).
MKS Instruments, Inc. (NASDAQ:MKSI) investors should pay attention to a decrease in hedge fund sentiment registered last quarter.Overall, 16 funds from our database held shares of the company at the end of September. At the end of this article we will also compare MKSI to other stocks including LPL Financial Holdings Inc (NASDAQ:LPLA), REGAL-BELOIT CORPORATION (NYSE:RBC), and Avista Corp (NYSE:AVA) to get a better sense of its popularity.
Follow Mks Instruments Inc (NASDAQ:MKSI)
Follow Mks Instruments Inc (NASDAQ:MKSI)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, let’s take a look at the latest action encompassing MKS Instruments, Inc. (NASDAQ:MKSI).
What does the smart money think about MKS Instruments, Inc. (NASDAQ:MKSI)?
Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, versus 19 funds a quarter earlier. Below, you can check out the change in hedge fund sentiment towards MKSI over the last five quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the largest position in MKS Instruments, Inc. (NASDAQ:MKSI). Royce & Associates has a $132.6 million position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is Ken Fisher’s Fisher Asset Management holding a $35.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Principal Global Investors’ Columbus Circle Investors, Tim Curro’s Value Holdings LP, and Eric Sprott’s Sprott Asset Management. We should note that two of these hedge funds (Value Holdings LP and Sprott Asset 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.
Due to the fact that MKS Instruments, Inc. (NASDAQ:MKSI) has sustained a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few funds that elected to cut their full holdings between July and September. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cashed in the largest stake of the 700 funds watched by Insider Monkey, totaling about $2.6 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $1.8 million worth.
Let’s check out hedge fund activity in other stocks similar to MKS Instruments, Inc. (NASDAQ:MKSI). We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), REGAL-BELOIT CORPORATION (NYSE:RBC), Avista Corp (NYSE:AVA), and The Medicines Company (NASDAQ:MDCO). All of these stocks’ market caps resemble MKSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LPLA | 12 | 964791 | -1 |
| RBC | 21 | 158826 | 6 |
| AVA | 9 | 56026 | -3 |
| MDCO | 27 | 584714 | 1 |
As you can see these stocks had an average of 17 investors with bullish positions and the average amount invested in these stocks was $441 million. That figure was $238 million in MKSI’s case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand Avista Corp (NYSE:AVA) is the least popular one with only nine bullish hedge fund positions. MKS Instruments, Inc. (NASDAQ:MKSI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard The Medicines Company (NASDAQ:MDCO) might be a better candidate to consider taking a long position in.
Disclosure: none
