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Hedge Funds Cashing Out Of The Middleby Corporation (MIDD)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of The Middleby Corporation (NASDAQ:MIDD).

Is The Middleby Corporation (NASDAQ:MIDD) ready to rally soon? The smart money is in a pessimistic mood. The number of long hedge fund bets were trimmed by 9 lately. Our calculations also showed that MIDD 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). MIDD was in 26 hedge funds’ portfolios at the end of March. There were 35 hedge funds in our database with MIDD holdings at the end of the previous quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 we’re going to go over the key hedge fund action encompassing The Middleby Corporation (NASDAQ:MIDD).

How have hedgies been trading The Middleby Corporation (NASDAQ:MIDD)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in MIDD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Bares Capital Management, managed by Brian Bares, holds the largest position in The Middleby Corporation (NASDAQ:MIDD). Bares Capital Management has a $22.4 million position in the stock, comprising 0.8% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $17.9 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish comprise D. E. Shaw’s D E Shaw, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to The Middleby Corporation (NASDAQ:MIDD), around 0.81% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, dishing out 0.62 percent of its 13F equity portfolio to MIDD.

Due to the fact that The Middleby Corporation (NASDAQ:MIDD) has witnessed declining sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that slashed their full holdings by the end of the first quarter. At the top of the heap, Andreas Halvorsen’s Viking Global dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $203.3 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $4.1 million worth. These moves are interesting, as total hedge fund interest fell by 9 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Middleby Corporation (NASDAQ:MIDD) but similarly valued. We will take a look at Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Manhattan Associates, Inc. (NASDAQ:MANH), LG Display Co Ltd. (NYSE:LPL), and Nevro Corp (NYSE:NVRO). All of these stocks’ market caps match MIDD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MNTA 36 666857 3
MANH 20 199741 -4
LPL 4 4761 1
NVRO 31 694464 -2
Average 22.75 391456 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $391 million. That figure was $85 million in MIDD’s case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 4 bullish hedge fund positions. The Middleby Corporation (NASDAQ:MIDD) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on MIDD, though not to the same extent, as the stock returned 19.7% during the first two months of the second quarter and outperformed the market as well.

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