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Hedge Funds Done Buying MarketAxess Holdings Inc. (MKTX)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MarketAxess Holdings Inc. (NASDAQ:MKTX).

Hedge fund interest in MarketAxess Holdings Inc. (NASDAQ:MKTX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MKTX to other stocks including Ameriprise Financial, Inc. (NYSE:AMP), Aptiv PLC (NYSE:APTV), and Hewlett Packard Enterprise Company (NYSE:HPE) to get a better sense of its popularity.

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 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

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. Now let’s review the fresh hedge fund action regarding MarketAxess Holdings Inc. (NASDAQ:MKTX).

What does smart money think about MarketAxess Holdings Inc. (NASDAQ:MKTX)?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in MKTX a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in MarketAxess Holdings Inc. (NASDAQ:MKTX), which was worth $399.5 million at the end of the third quarter. On the second spot was GuardCap Asset Management which amassed $78.4 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 4.53% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, setting aside 0.99 percent of its 13F equity portfolio to MKTX.

Judging by the fact that MarketAxess Holdings Inc. (NASDAQ:MKTX) has witnessed falling interest from hedge fund managers, logic holds that there was a specific group of funds that decided to sell off their full holdings last quarter. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management dumped the biggest stake of all the hedgies tracked by Insider Monkey, comprising close to $4.3 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund dropped about $3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MarketAxess Holdings Inc. (NASDAQ:MKTX) but similarly valued. These stocks are Ameriprise Financial, Inc. (NYSE:AMP), Aptiv PLC (NYSE:APTV), Hewlett Packard Enterprise Company (NYSE:HPE), and Twilio Inc. (NYSE:TWLO). All of these stocks’ market caps match MKTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMP 26 605759 -11
APTV 33 679352 -13
HPE 29 641977 -12
TWLO 52 1549546 -8
Average 35 869159 -11

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $869 million. That figure was $712 million in MKTX’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 26 bullish hedge fund positions. MarketAxess Holdings Inc. (NASDAQ:MKTX) is not the least popular stock in this group but hedge fund interest is still below 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 and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on MKTX as the stock returned 53.1% during the second quarter and outperformed the market by an even larger margin.

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