Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at MarketAxess Holdings Inc. (NASDAQ:MKTX) from the perspective of those elite funds.
MarketAxess Holdings Inc. (NASDAQ:MKTX)’s stock has had a good year so far, gaining more than 48% and the best stock pickers are in an optimistic mood. The number of long hedge fund bets inched up by 3 in the third quarter. However, 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 Spirit Airlines Incorporated (NASDAQ:SAVE), Eagle Materials, Inc. (NYSE:EXP), and Prosperity Bancshares, Inc. (NYSE:PB) to gather more data points.
Follow Marketaxess Holdings Inc (NASDAQ:MKTX)
Follow Marketaxess Holdings Inc (NASDAQ:MKTX)
If you’d ask most market participants, hedge funds are viewed as worthless, old financial tools of the past. While there are greater than 8000 funds with their doors open at present, We choose to focus on the elite of this club, around 700 funds. These hedge fund managers handle bulk of all hedge funds’ total asset base, and by observing their inimitable equity investments, Insider Monkey has unearthed a number of investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, let’s take a look at the key action encompassing MarketAxess Holdings Inc. (NASDAQ:MKTX).
What have hedge funds been doing with MarketAxess Holdings Inc. (NASDAQ:MKTX)?
Heading into Q4, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 25% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the biggest position in MarketAxess Holdings Inc. (NASDAQ:MKTX), worth close to $23.9 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is Junto Capital Management, managed by James Parsons, which holds a $20.8 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Jim Simons’s Renaissance Technologies and Chuck Royce’s Royce & Associates.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Junto Capital Management, initiated the most valuable position in MarketAxess Holdings Inc. (NASDAQ:MKTX). George Hall’s Clinton Group also initiated a $1.6 million position during the quarter. The other funds with brand new MKTX positions are Israel Englander’s Millennium Management, Jacob Gottlieb’s Visium Asset Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MarketAxess Holdings Inc. (NASDAQ:MKTX) but similarly valued. These stocks are Spirit Airlines Incorporated (NASDAQ:SAVE), Eagle Materials, Inc. (NYSE:EXP), Prosperity Bancshares, Inc. (NYSE:PB), and Youku Tudou Inc (ADR) (NYSE:YOKU). This group of stocks’ market values are similar to MKTX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAVE | 39 | 468214 | 8 |
| EXP | 37 | 727564 | 2 |
| PB | 16 | 121516 | -1 |
| YOKU | 15 | 339985 | -5 |
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $414 million, compared to $100 million in MKTX’s case. Spirit Airlines Incorporated (NASDAQ:SAVE) is the most popular stock in this table. On the other hand Youku Tudou Inc (ADR) (NYSE:YOKU) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks MarketAxess Holdings Inc. (NASDAQ:MKTX) is even less popular than YOKU. 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.
