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Hedge Funds Aren’t Into The Michaels Companies Inc (MIK) Anymore

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 first 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 4.5 years and analyze what the smart money thinks of The Michaels Companies Inc (NASDAQ:MIK) based on that data.

Is The Michaels Companies Inc (NASDAQ:MIK) a good stock to buy now? Money managers are selling. The number of bullish hedge fund positions decreased by 4 in recent months. Our calculations also showed that MIK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Burry Scion Capital

Michael Burry of Scion Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action surrounding The Michaels Companies Inc (NASDAQ:MIK).

Hedge fund activity in The Michaels Companies Inc (NASDAQ:MIK)

At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MIK over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in The Michaels Companies Inc (NASDAQ:MIK) was held by Contrarius Investment Management, which reported holding $13.6 million worth of stock at the end of September. It was followed by Scion Asset Management with a $5.3 million position. Other investors bullish on the company included Glenview Capital, Renaissance Technologies, and Tremblant Capital. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to The Michaels Companies Inc (NASDAQ:MIK), around 6.13% of its 13F portfolio. Mudrick Capital Management is also relatively very bullish on the stock, earmarking 2.02 percent of its 13F equity portfolio to MIK.

Due to the fact that The Michaels Companies Inc (NASDAQ:MIK) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there were a few money managers who were dropping their entire stakes by the end of the first quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest stake of all the hedgies monitored by Insider Monkey, valued at about $15.5 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also said goodbye to its stock, about $11.9 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Michaels Companies Inc (NASDAQ:MIK) but similarly valued. These stocks are HEXO Corp. (NYSE:HEXO), Territorial Bancorp Inc (NASDAQ:TBNK), Motorcar Parts of America, Inc. (NASDAQ:MPAA), and Majesco (NASDAQ:MJCO). All of these stocks’ market caps are similar to MIK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HEXO 7 720 1
TBNK 4 20232 0
MPAA 6 44768 1
MJCO 1 63 0
Average 4.5 16446 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $33 million in MIK’s case. HEXO Corp. (NYSE:HEXO) is the most popular stock in this table. On the other hand Majesco (NASDAQ:MJCO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks The Michaels Companies Inc (NASDAQ:MIK) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on MIK as the stock returned 275.6% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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