Hedge Funds Have Never Been This Bullish On Mercury Systems Inc (MRCY)

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 gone over 730 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 June 28th. In this article we look at what those investors think of Mercury Systems Inc (NASDAQ:MRCY).

Mercury Systems Inc (NASDAQ:MRCY) has seen an increase in hedge fund sentiment of late. Our calculations also showed that MRCY isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the latest hedge fund action surrounding Mercury Systems Inc (NASDAQ:MRCY).

How have hedgies been trading Mercury Systems Inc (NASDAQ:MRCY)?

At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MRCY over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Richard Driehaus

More specifically, Driehaus Capital was the largest shareholder of Mercury Systems Inc (NASDAQ:MRCY), with a stake worth $21.5 million reported as of the end of March. Trailing Driehaus Capital was D E Shaw, which amassed a stake valued at $17.2 million. Two Sigma Advisors, Marshall Wace LLP, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers have jumped into Mercury Systems Inc (NASDAQ:MRCY) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most valuable position in Mercury Systems Inc (NASDAQ:MRCY). Two Sigma Advisors had $14.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $7.9 million investment in the stock during the quarter. The other funds with brand new MRCY positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Josh Goldberg’s G2 Investment Partners Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to Mercury Systems Inc (NASDAQ:MRCY). These stocks are ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Stag Industrial Inc (NYSE:STAG), Mirati Therapeutics, Inc. (NASDAQ:MRTX), and Amedisys Inc (NASDAQ:AMED). All of these stocks’ market caps resemble MRCY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACAD 21 1345657 1
STAG 11 138143 -4
MRTX 27 1623476 -1
AMED 24 209888 -2
Average 20.75 829291 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $829 million. That figure was $111 million in MRCY’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 11 bullish hedge fund positions. Mercury Systems Inc (NASDAQ:MRCY) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on MRCY as the stock returned 15.4% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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