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Did Hedge Funds Drop The Ball On Manpowergroup Inc (MAN) ?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Manpowergroup Inc (NYSE:MAN).

Manpowergroup Inc (NYSE:MAN) investors should pay attention to a decrease in hedge fund interest in recent months. MAN was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 28 hedge funds in our database with MAN holdings at the end of the previous quarter. Our calculations also showed that MAN isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We’re going to take a look at the recent hedge fund action surrounding Manpowergroup Inc (NYSE:MAN).

What does the smart money think about Manpowergroup Inc (NYSE:MAN)?

At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the second quarter of 2018. On the other hand, there were a total of 27 hedge funds with a bullish position in MAN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MAN_apr2019

More specifically, AQR Capital Management was the largest shareholder of Manpowergroup Inc (NYSE:MAN), with a stake worth $168.9 million reported as of the end of September. Trailing AQR Capital Management was Two Sigma Advisors, which amassed a stake valued at $53.6 million. D E Shaw, Royce & Associates, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Since Manpowergroup Inc (NYSE:MAN) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Sander Gerber’s Hudson Bay Capital Management dropped the biggest investment of the 700 funds followed by Insider Monkey, valued at an estimated $8.3 million in stock. Thomas Bailard’s fund, Bailard Inc, also said goodbye to its stock, about $1.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Manpowergroup Inc (NYSE:MAN). We will take a look at Flex Ltd. (NASDAQ:FLEX), Choice Hotels International, Inc. (NYSE:CHH), Highwoods Properties Inc (NYSE:HIW), and Antero Midstream Corporation (NYSE:AM). This group of stocks’ market caps resemble MAN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLEX 24 675508 -2
CHH 19 226548 1
HIW 17 182549 3
AM 7 18668 -4
Average 16.75 275818 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $276 million. That figure was $418 million in MAN’s case. Flex Ltd. (NASDAQ:FLEX) is the most popular stock in this table. On the other hand Antero Midstream Corporation (NYSE:AM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Manpowergroup Inc (NYSE:MAN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MAN as the stock returned 48% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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