Hedge Funds Never Been Less Bullish On Meritor Inc (MTOR)

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Meritor Inc (NYSE:MTOR).

Meritor Inc (NYSE:MTOR) investors should be aware of a decrease in hedge fund sentiment in recent months. MTOR was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with MTOR positions at the end of the previous quarter. Our calculations also showed that MTOR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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.

Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 we’re going to take a peek at the latest hedge fund action encompassing Meritor Inc (NYSE:MTOR).

Hedge fund activity in Meritor Inc (NYSE:MTOR)

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in MTOR over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Glenview Capital held the most valuable stake in Meritor Inc (NYSE:MTOR), which was worth $95.5 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $16.2 million worth of shares. Arrowstreet Capital, GMT Capital, and Balyasny Asset 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 Anchor Bolt Capital allocated the biggest weight to Meritor Inc (NYSE:MTOR), around 4.47% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, earmarking 3.38 percent of its 13F equity portfolio to MTOR.

Since Meritor Inc (NYSE:MTOR) has faced a decline in interest from hedge fund managers, logic holds that there is a sect of money managers that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Richard Driehaus’s Driehaus Capital said goodbye to the largest investment of all the hedgies followed by Insider Monkey, worth about $14.5 million in stock. Renaissance Technologies, also sold off its stock, about $12.9 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 12 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Meritor Inc (NYSE:MTOR). We will take a look at CSW Industrials, Inc. (NASDAQ:CSWI), Kronos Worldwide, Inc. (NYSE:KRO), Mesa Laboratories, Inc. (NASDAQ:MLAB), and BP Midstream Partners LP (NYSE:BPMP). This group of stocks’ market caps are similar to MTOR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSWI 16 32007 0
KRO 13 35959 0
MLAB 7 72515 -3
BPMP 5 6669 -1
Average 10.25 36788 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $166 million in MTOR’s case. CSW Industrials, Inc. (NASDAQ:CSWI) is the most popular stock in this table. On the other hand BP Midstream Partners LP (NYSE:BPMP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Meritor Inc (NYSE:MTOR) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on MTOR as the stock returned 50.3% so far in Q2 (through June 22nd) 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.

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