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Did Hedge Funds Make The Right Call On Masonite International Corp (DOOR) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Masonite International Corp (NYSE:DOOR) and determine whether hedge funds skillfully traded this stock.

Masonite International Corp (NYSE:DOOR) was in 26 hedge funds’ portfolios at the end of March. DOOR shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 21 hedge funds in our database with DOOR positions at the end of the previous quarter. Our calculations also showed that DOOR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Kevin Oram Praesidium Investment Management

Kevin Oram of Praesidium Investment Management Company

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Masonite International Corp (NYSE:DOOR).

What have hedge funds been doing with Masonite International Corp (NYSE:DOOR)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DOOR over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Masonite International Corp (NYSE:DOOR) was held by Praesidium Investment Management Company, which reported holding $105 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $29.1 million position. Other investors bullish on the company included Sunriver Management, Renaissance Technologies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Masonite International Corp (NYSE:DOOR), around 8.5% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, earmarking 5.1 percent of its 13F equity portfolio to DOOR.

Consequently, some big names were breaking ground themselves. Columbus Circle Investors, managed by Principal Global Investors, initiated the largest position in Masonite International Corp (NYSE:DOOR). Columbus Circle Investors had $7.2 million invested in the company at the end of the quarter. Len Kipp and Xavier Majic’s Maple Rock Capital also made a $3.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Greg Eisner’s Engineers Gate Manager, and Sander Gerber’s Hudson Bay Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Masonite International Corp (NYSE:DOOR) but similarly valued. These stocks are Grupo Simec S.A.B. de C.V. (NYSE:SIM), Yext, Inc. (NYSE:YEXT), Monmouth Real Estate Investment Corp. (NYSE:MNR), and Canada Goose Holdings Inc. (NYSE:GOOS). This group of stocks’ market values match DOOR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SIM 1 1807 0
YEXT 9 18486 -4
MNR 12 61577 -2
GOOS 26 220589 6
Average 12 75615 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $271 million in DOOR’s case. Canada Goose Holdings Inc. (NYSE:GOOS) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Masonite International Corp (NYSE:DOOR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on DOOR as the stock returned 63.9% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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