The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Mercury General Corporation (NYSE:MCY) and determine whether the smart money was really smart about this stock.
Is Mercury General Corporation (NYSE:MCY) a buy here? Hedge funds were becoming more confident. The number of bullish hedge fund positions moved up by 1 lately. Our calculations also showed that MCY 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. 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 if you have any good ideas send us an email. Now let’s check out the latest hedge fund action regarding Mercury General Corporation (NYSE:MCY).
What have hedge funds been doing with Mercury General Corporation (NYSE:MCY)?
Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MCY over the last 18 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Mercury General Corporation (NYSE:MCY) was held by Renaissance Technologies, which reported holding $96.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $30.3 million position. Other investors bullish on the company included Millennium Management, Prospector Partners, and D E Shaw. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Mercury General Corporation (NYSE:MCY), around 1.97% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to MCY.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Mercury General Corporation (NYSE:MCY). Arrowstreet Capital had $5.3 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $1.3 million investment in the stock during the quarter. The other funds with brand new MCY positions are Ira Unschuld’s Brant Point Investment Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks similar to Mercury General Corporation (NYSE:MCY). These stocks are Sabra Health Care REIT Inc (NASDAQ:SBRA), Itron, Inc. (NASDAQ:ITRI), Quaker Chemical Corp (NYSE:KWR), and Vivint Smart Home, Inc. (NYSE:VVNT). This group of stocks’ market values are closest to MCY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBRA | 17 | 146830 | -10 |
| ITRI | 19 | 246826 | -2 |
| KWR | 8 | 120286 | -1 |
| VVNT | 9 | 6514 | -6 |
| Average | 13.25 | 130114 | -4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $194 million in MCY’s case. Itron, Inc. (NASDAQ:ITRI) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Mercury General Corporation (NYSE:MCY) is more popular among hedge funds. 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 and still beat the market by 15.5 percentage points. Unfortunately MCY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MCY were disappointed as the stock returned 1.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
