Hedge Funds Were Getting Burned By Macquarie Infrastructure Corporation (MIC) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 plowed through 835 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 December 31st. In this article we look at what those investors think of Macquarie Infrastructure Corporation (NYSE:MIC).

Macquarie Infrastructure Corporation (NYSE:MIC) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that MIC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Bronchick - Cove Street Capital

Jeffrey Bronchick of Cove Street Capital

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding Macquarie Infrastructure Corporation (NYSE:MIC).

How are hedge funds trading Macquarie Infrastructure Corporation (NYSE:MIC)?

Heading into the first quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MIC over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Macquarie Infrastructure Corporation (NYSE:MIC) was held by Renaissance Technologies, which reported holding $68.3 million worth of stock at the end of September. It was followed by GAMCO Investors with a $43.4 million position. Other investors bullish on the company included Rubric Capital Management, Cove Street Capital, and Polar Capital. In terms of the portfolio weights assigned to each position Rubric Capital Management allocated the biggest weight to Macquarie Infrastructure Corporation (NYSE:MIC), around 3.87% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, designating 3.64 percent of its 13F equity portfolio to MIC.

As industrywide interest jumped, specific money managers have been driving this bullishness. Waterfront Capital Partners, managed by Eduardo Abush, established the biggest position in Macquarie Infrastructure Corporation (NYSE:MIC). Waterfront Capital Partners had $7.3 million invested in the company at the end of the quarter. Harry Gail’s Harspring Capital Management also made a $5.6 million investment in the stock during the quarter. The other funds with brand new MIC positions are Isaac Corre’s Governors Lane, Vince Maddi and Shawn Brennan’s SIR Capital Management, and Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks similar to Macquarie Infrastructure Corporation (NYSE:MIC). We will take a look at Verint Systems Inc. (NASDAQ:VRNT), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Antero Midstream Corp (NYSE:AM), and OneConnect Financial Technology Co., Ltd. (NYSE:OCFT). This group of stocks’ market valuations match MIC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRNT 15 285514 -7
CBRL 24 155764 0
AM 14 144307 -2
OCFT 9 14809 9
Average 15.5 150099 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $275 million in MIC’s case. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Macquarie Infrastructure Corporation (NYSE:MIC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately MIC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MIC were disappointed as the stock returned -46.7% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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