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Hedge Fund Sentiment Is Stagnant On Moneygram International Inc (MGI)

Is Moneygram International Inc (NASDAQ:MGI) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Moneygram International Inc (NASDAQ:MGI) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of September. 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 Ramaco Resources, Inc. (NASDAQ:METC), SmartFinancial, Inc. (NASDAQ:SMBK), and BioTime, Inc. (NYSE:BTX) to gather more data points.

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 18 percentage points since May 2014 through December 3, 2018 (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.

Ken Griffin CITADEL INVESTMENT GROUP

Let’s analyze the new hedge fund action regarding Moneygram International Inc (NASDAQ:MGI).

What does the smart money think about Moneygram International Inc (NASDAQ:MGI)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MGI over the last 13 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

MGI_dec2018

The largest stake in Moneygram International Inc (NASDAQ:MGI) was held by D E Shaw, which reported holding $10.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $3.8 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Rubric Capital Management.

Due to the fact that Moneygram International Inc (NASDAQ:MGI) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that slashed their entire stakes by the end of the third quarter. At the top of the heap, Bradley LouisáRadoff’s Fondren Management said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $0.9 million in stock, and Tom Sandell’s Sandell Asset Management was right behind this move, as the fund dropped about $0.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Moneygram International Inc (NASDAQ:MGI) but similarly valued. These stocks are Ramaco Resources, Inc. (NASDAQ:METC), SmartFinancial, Inc. (NASDAQ:SMBK), BioTime, Inc. (NYSE:BTX), and Central Valley Community Bancorp (NASDAQ:CVCY). This group of stocks’ market valuations match MGI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
METC 9 15692 1
SMBK 4 22762 -1
BTX 5 71152 -3
CVCY 4 17413 1
Average 5.5 31755 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $33 million in MGI’s case. Ramaco Resources, Inc. (NASDAQ:METC) is the most popular stock in this table. On the other hand SmartFinancial, Inc. (NASDAQ:SMBK) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Moneygram International Inc (NASDAQ:MGI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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