Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of MarketAxess Holdings Inc. (NASDAQ:MKTX) based on that data and determine whether they were really smart about the stock.
Is MarketAxess Holdings Inc. (NASDAQ:MKTX) ready to rally soon? The best stock pickers were becoming hopeful. The number of long hedge fund bets rose by 6 in recent months. MarketAxess Holdings Inc. (NASDAQ:MKTX) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MKTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 27 hedge funds in our database with MKTX holdings at the end of March.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the key hedge fund action regarding MarketAxess Holdings Inc. (NASDAQ:MKTX).
How have hedgies been trading MarketAxess Holdings Inc. (NASDAQ:MKTX)?
Heading into the third quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MKTX over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in MarketAxess Holdings Inc. (NASDAQ:MKTX), which was worth $518.7 million at the end of the third quarter. On the second spot was GuardCap Asset Management which amassed $104.9 million worth of shares. Citadel Investment Group, Arrowstreet Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position GuardCap Asset Management allocated the biggest weight to MarketAxess Holdings Inc. (NASDAQ:MKTX), around 4.03% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, setting aside 2.15 percent of its 13F equity portfolio to MKTX.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in MarketAxess Holdings Inc. (NASDAQ:MKTX). Marshall Wace LLP had $8.8 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $8 million position during the quarter. The other funds with brand new MKTX positions are Matthew Hulsizer’s PEAK6 Capital Management, Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management, and Brian Ashford-Russell and Tim Woolley’s Polar Capital.
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. We will take a look at Keysight Technologies Inc (NYSE:KEYS), Wipro Limited (NYSE:WIT), Entergy Corporation (NYSE:ETR), The Trade Desk, Inc. (NASDAQ:TTD), Wayfair Inc (NYSE:W), Garmin Ltd. (NASDAQ:GRMN), and Coupa Software Incorporated (NASDAQ:COUP). This group of stocks’ market caps resemble MKTX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $1289 million. That figure was $918 million in MKTX’s case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 7 bullish hedge fund positions. MarketAxess Holdings Inc. (NASDAQ:MKTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MKTX is 70.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately MKTX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MKTX were disappointed as the stock returned -2.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.