Did Hedge Funds Drop The Ball On Modine Manufacturing Company (MOD) ?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Modine Manufacturing Company (NYSE:MOD).

Modine Manufacturing Company (NYSE:MOD) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. MOD was in 17 hedge funds’ portfolios at the end of December. There were 18 hedge funds in our database with MOD holdings at the end of the previous quarter. Our calculations also showed that mod 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Mario Gabelli

We’re going to take a look at the key hedge fund action regarding Modine Manufacturing Company (NYSE:MOD).

What does the smart money think about Modine Manufacturing Company (NYSE:MOD)?

At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in MOD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MOD Positions

More specifically, GAMCO Investors was the largest shareholder of Modine Manufacturing Company (NYSE:MOD), with a stake worth $17.1 million reported as of the end of December. Trailing GAMCO Investors was Royce & Associates, which amassed a stake valued at $14.5 million. DC Capital Partners, D E Shaw, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Modine Manufacturing Company (NYSE:MOD) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies that elected to cut their full holdings in the third quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management sold off the biggest stake of the 700 funds followed by Insider Monkey, valued at close to $1.2 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund cut about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Modine Manufacturing Company (NYSE:MOD). These stocks are Viking Therapeutics, Inc. (NASDAQ:VKTX), pdvWireless Inc (NASDAQ:PDVW), Omeros Corporation (NASDAQ:OMER), and Re/Max Holdings Inc (NYSE:RMAX). This group of stocks’ market caps are closest to MOD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VKTX 20 56464 -7
PDVW 12 259922 3
OMER 7 40210 -1
RMAX 5 46656 -5
Average 11 100813 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $60 million in MOD’s case. Viking Therapeutics, Inc. (NASDAQ:VKTX) is the most popular stock in this table. On the other hand Re/Max Holdings Inc (NYSE:RMAX) is the least popular one with only 5 bullish hedge fund positions. Modine Manufacturing Company (NYSE:MOD) is not the most popular stock in this group but hedge fund interest is still above average. 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 MOD as the stock returned 47.9% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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