It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Mentor Graphics Corp (NASDAQ:MENT) during the quarter below.
Is Mentor Graphics Corp (NASDAQ:MENT) going to take off soon? Hedge funds are becoming less confident. The number of bullish hedge fund positions were cut by 2 recently. Mentor Graphics Corp (NASDAQ:MENT) was in 21 hedge funds’ portfolios at the end of the third quarter of 2015. There were 23 hedge funds in our database with Mentor Graphics Corp (NASDAQ:MENT) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Progressive Waste Solutions Ltd (USA) (NYSE:BIN), Enstar Group Ltd. (NASDAQ:ESGR), and WGL Holdings Inc (NYSE:WGL) to gather more data points.
In the financial world, there are tons of gauges stock traders use to evaluate publicly traded companies. Two of the less utilized gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outperform the broader indices by a solid amount (see the details here).
Keeping this in mind, we’re going to take a peek at the new action encompassing Mentor Graphics Corp (NASDAQ:MENT).
How have hedgies been trading Mentor Graphics Corp (NASDAQ:MENT)?
At the end of Q3, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 9% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Icahn Capital LP, managed by Carl Icahn, holds the most valuable position in Mentor Graphics Corp (NASDAQ:MENT). Icahn Capital LP has a $397 million position in the stock, comprising 1.4% of its 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $43.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Chuck Royce’s Royce & Associates, Joel Greenblatt’s Gotham Asset Management, and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Mentor Graphics Corp (NASDAQ:MENT) has experienced a declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Glenn Russell Dubin’s Highbridge Capital Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $13.7 million in stock. Renaissance Technologies also said goodbye to its stock, about $11.5 million worth of shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Mentor Graphics Corp (NASDAQ:MENT). These stocks are Progressive Waste Solutions Ltd (USA) (NYSE:BIN), Enstar Group Ltd. (NASDAQ:ESGR), WGL Holdings Inc (NYSE:WGL), and Cypress Semiconductor Corporation (NASDAQ:CY). All of these stocks’ market caps match Mentor Graphics Corp (NASDAQ:MENT)’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $592 million in Mentor Graphics Corp (NASDAQ:MENT)’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand, Enstar Group Ltd. (NASDAQ:ESGR) is the least popular one with only 11 bullish hedge fund positions. Mentor Graphics Corp (NASDAQ:MENT) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Cypress Semiconductor Corporation (NASDAQ:CY) might be a better candidate to consider a long position.