Did Hedge Funds Make The Right Call On The Middleby Corporation (MIDD) ?

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 The Middleby Corporation (NASDAQ:MIDD) and determine whether the smart money was really smart about this stock.

The Middleby Corporation (NASDAQ:MIDD) investors should be aware of a decrease in enthusiasm from smart money recently. Our calculations also showed that MIDD 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.

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 under-the-radar lithium stock. With all of this in mind let’s take a gander at the new hedge fund action regarding The Middleby Corporation (NASDAQ:MIDD).

Hedge fund activity in The Middleby Corporation (NASDAQ:MIDD)

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MIDD over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Middleby Corporation (NASDAQ:MIDD) was held by Bares Capital Management, which reported holding $22.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $17.9 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to The Middleby Corporation (NASDAQ:MIDD), around 0.81% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, earmarking 0.62 percent of its 13F equity portfolio to MIDD.

Judging by the fact that The Middleby Corporation (NASDAQ:MIDD) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there were a few hedge funds that slashed their entire stakes in the first quarter. It’s worth mentioning that Andreas Halvorsen’s Viking Global dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth about $203.3 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $4.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 9 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to The Middleby Corporation (NASDAQ:MIDD). We will take a look at Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Manhattan Associates, Inc. (NASDAQ:MANH), LG Display Co Ltd. (NYSE:LPL), and Nevro Corp (NYSE:NVRO). This group of stocks’ market values resemble MIDD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $391 million. That figure was $85 million in MIDD’s case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 4 bullish hedge fund positions. The Middleby Corporation (NASDAQ:MIDD) 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 MIDD as the stock returned 38.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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