We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like MiX Telematics Limited (NYSE:MIXT).
Hedge fund interest in MiX Telematics Limited (NYSE:MIXT) 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 MIXT to other stocks including Miller Industries, Inc. (NYSE:MLR), Digi International Inc. (NASDAQ:DGII), and Guaranty Bancshares, Inc. (NASDAQ:GNTY) to get a better sense of its popularity.
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We’re going to take a look at the fresh hedge fund action encompassing MiX Telematics Limited (NYSE:MIXT).
How have hedgies been trading MiX Telematics Limited (NYSE:MIXT)?
At Q2’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in MIXT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, G2 Investment Partners Management held the most valuable stake in MiX Telematics Limited (NYSE:MIXT), which was worth $15.6 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $11.6 million worth of shares. Moreover, ACK Asset Management, Polar Capital, and Millennium Management were also bullish on MiX Telematics Limited (NYSE:MIXT), allocating a large percentage of their portfolios to this stock.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the second quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MiX Telematics Limited (NYSE:MIXT) but similarly valued. We will take a look at Miller Industries, Inc. (NYSE:MLR), Digi International Inc. (NASDAQ:DGII), Guaranty Bancshares, Inc. (NASDAQ:GNTY), and Exantas Capital Corp. (NYSE:XAN). This group of stocks’ market caps resemble MIXT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $47 million in MIXT’s case. Exantas Capital Corp. (NYSE:XAN) is the most popular stock in this table. On the other hand Guaranty Bancshares, Inc. (NASDAQ:GNTY) is the least popular one with only 3 bullish hedge fund positions. MiX Telematics Limited (NYSE:MIXT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MIXT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MIXT investors were disappointed as the stock returned -6.7% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.