Hedge Funds Are Selling Methanex Corporation (MEOH)

Is Methanex Corporation (NASDAQ:MEOH) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Methanex Corporation (NASDAQ:MEOH) has experienced a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that MEOH isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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 40 percentage points since May 2014 through May 30, 2019 (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.

John Overdeck of Two Sigma

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the key hedge fund action encompassing Methanex Corporation (NASDAQ:MEOH).

Hedge fund activity in Methanex Corporation (NASDAQ:MEOH)

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MEOH over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MEOH Positions

Among these funds, Renaissance Technologies held the most valuable stake in Methanex Corporation (NASDAQ:MEOH), which was worth $34.8 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $28.3 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and D E Shaw were also bullish on Methanex Corporation (NASDAQ:MEOH), allocating a large percentage of their portfolios to this stock.

Because Methanex Corporation (NASDAQ:MEOH) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of hedge funds that elected to cut their full holdings last quarter. Intriguingly, Cliff Asness’s AQR Capital Management cut the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $121.1 million in call options. Steve Cohen’s fund, Point72 Asset Management, also cut its call options, about $5.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Methanex Corporation (NASDAQ:MEOH) but similarly valued. We will take a look at Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Olin Corporation (NYSE:OLN), Wright Medical Group N.V. (NASDAQ:WMGI), and Silgan Holdings Inc. (NASDAQ:SLGN). All of these stocks’ market caps match MEOH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSOD 27 661147 -2
OLN 23 604453 -5
WMGI 34 718534 -1
SLGN 18 210598 3
Average 25.5 548683 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $118 million in MEOH’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand Silgan Holdings Inc. (NASDAQ:SLGN) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Methanex Corporation (NASDAQ:MEOH) is even less popular than SLGN. Hedge funds dodged a bullet by taking a bearish stance towards MEOH. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MEOH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MEOH investors were disappointed as the stock returned -21.2% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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