Hedge Funds Have Never Been More Bullish On Milacron Holdings Corp (MCRN)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Milacron Holdings Corp (NYSE:MCRN).

Milacron Holdings Corp (NYSE:MCRN) was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2018. MCRN investors should pay attention to an increase in hedge fund interest recently. There were 17 hedge funds in our database with MCRN positions at the end of the previous quarter. Our calculations also showed that mcrn isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Brown Hawk Ridge Partners

We’re going to take a glance at the fresh hedge fund action encompassing Milacron Holdings Corp (NYSE:MCRN).

What does the smart money think about Milacron Holdings Corp (NYSE:MCRN)?

Heading into the first quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in MCRN a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds with MCRN Positions

The largest stake in Milacron Holdings Corp (NYSE:MCRN) was held by Royce & Associates, which reported holding $12.9 million worth of stock at the end of December. It was followed by Hawk Ridge Management with a $10.4 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and GLG Partners.

As industrywide interest jumped, some big names have jumped into Milacron Holdings Corp (NYSE:MCRN) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Milacron Holdings Corp (NYSE:MCRN). Marshall Wace LLP had $0.7 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new MCRN investors: Paul Tudor Jones’s Tudor Investment Corp, Ric Dillon’s Diamond Hill Capital, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks similar to Milacron Holdings Corp (NYSE:MCRN). These stocks are Apogee Enterprises, Inc. (NASDAQ:APOG), Tactile Systems Technology, Inc. (NASDAQ:TCMD), Canadian Solar Inc. (NASDAQ:CSIQ), and State Bank Financial Corp (NASDAQ:STBZ). This group of stocks’ market valuations are closest to MCRN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APOG 16 115597 -1
TCMD 14 39982 4
CSIQ 11 96306 -4
STBZ 17 120356 -4
Average 14.5 93060 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $56 million in MCRN’s case. State Bank Financial Corp (NASDAQ:STBZ) is the most popular stock in this table. On the other hand Canadian Solar Inc. (NASDAQ:CSIQ) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Milacron Holdings Corp (NYSE:MCRN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MCRN as the stock returned 26.2% 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.

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