Hedge Funds Dipping Their Toes Back Into Macquarie Infrastructure Corporation (MIC)

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 Macquarie Infrastructure Corporation (NYSE:MIC) based on that data and determine whether they were really smart about the stock.

Is Macquarie Infrastructure Corporation (NYSE:MIC) a healthy stock for your portfolio? Prominent investors were buying. The number of long hedge fund bets increased by 8 in recent months. Macquarie Infrastructure Corporation (NYSE:MIC) was in 38 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 69. Our calculations also showed that MIC 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 30 hedge funds in our database with MIC holdings at the end of March.

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Brown Hawk Ridge Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. With all of this in mind we’re going to review the recent hedge fund action surrounding Macquarie Infrastructure Corporation (NYSE:MIC).

How have hedgies been trading Macquarie Infrastructure Corporation (NYSE:MIC)?

At the end of the second quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in MIC over the last 20 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is MIC A Good Stock To Buy?

More specifically, Eminence Capital was the largest shareholder of Macquarie Infrastructure Corporation (NYSE:MIC), with a stake worth $239.4 million reported as of the end of September. Trailing Eminence Capital was Hawk Ridge Management, which amassed a stake valued at $38.6 million. GAMCO Investors, Rubric Capital Management, and Cove Street Capital 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 Litespeed Management allocated the biggest weight to Macquarie Infrastructure Corporation (NYSE:MIC), around 17.66% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, designating 5.44 percent of its 13F equity portfolio to MIC.

As industrywide interest jumped, specific money managers have jumped into Macquarie Infrastructure Corporation (NYSE:MIC) headfirst. Hawk Ridge Management, managed by David Brown, initiated the biggest position in Macquarie Infrastructure Corporation (NYSE:MIC). Hawk Ridge Management had $38.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $22.8 million position during the quarter. The following funds were also among the new MIC investors: John Petry’s Sessa Capital, Matthew Mark’s Jet Capital Investors, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Macquarie Infrastructure Corporation (NYSE:MIC) but similarly valued. We will take a look at Itron, Inc. (NASDAQ:ITRI), AllianceBernstein Holding LP (NYSE:AB), Endava plc (NYSE:DAVA), Compania Cervecerias Unidas S.A. (NYSE:CCU), Millicom International Cellular S.A. (NASDAQ:TIGO), SLM Corp (NASDAQ:SLM), and United States Cellular Corporation (NYSE:USM). All of these stocks’ market caps resemble MIC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITRI 13 300874 -6
AB 7 23909 0
DAVA 8 76269 -1
CCU 8 22635 -3
TIGO 8 61613 1
SLM 32 462666 5
USM 16 97313 4
Average 13.1 149326 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $564 million in MIC’s case. SLM Corp (NASDAQ:SLM) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Macquarie Infrastructure Corporation (NYSE:MIC) is more popular among hedge funds. Our overall hedge fund sentiment score for MIC is 76.5. 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. 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 still beat the market by 23.2 percentage points. Unfortunately MIC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MIC were disappointed as the stock returned -8.7% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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