Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Moelis & Co (NYSE:MC) .
Moelis & Co (NYSE:MC) investors should be aware of an increase in enthusiasm from smart money lately. MC was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 8 hedge funds in our database with MC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Synergy Resources Corp (NYSEAMEX:SYRG), Meritage Homes Corp (NYSE:MTH), and Clovis Oncology Inc (NASDAQ:CLVS) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, we’re going to review the new action surrounding Moelis & Co (NYSE:MC).
How have hedgies been trading Moelis & Co (NYSE:MC)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in MC at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Moelis & Co (NYSE:MC), worth close to $58.1 million. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, holding a $5.9 million position. Other hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Glenn Russell Dubin of Highbridge Capital Management initiated the most valuable position in Moelis & Co (NYSE:MC). Highbridge Capital Management had $0.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new MC position is Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Moelis & Co (NYSE:MC) but similarly valued. These stocks are Synergy Resources Corp (NYSEAMEX:SYRG), Meritage Homes Corp (NYSE:MTH), Clovis Oncology Inc (NASDAQ:CLVS), and Axovant Sciences Ltd (NYSE:AXON). This group of stocks’ market caps resemble MC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $589 million. That figure was $72 million in MC’s case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand Meritage Homes Corp (NYSE:MTH) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Moelis & Co (NYSE:MC) is as less popular than MTH. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.