Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Is Metaldyne Performance Group Inc (NYSE:MPG) a buy right now? Investors who are in the know are undeniably taking an optimistic view. The number of long hedge fund positions that are disclosed in regulatory 13F filings increased by 4 lately. There were 12 hedge funds in our database with MPG positions at the end of the 2016 third 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 Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), MBIA Inc. (NYSE:MBI), and Tutor Perini Corp (NYSE:TPC) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
How are hedge funds trading Metaldyne Performance Group Inc (NYSE:MPG)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a jump of 50% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in MPG at the beginning of this year. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, John A. Levin’s Levin Capital Strategies has the number one position in Metaldyne Performance Group Inc (NYSE:MPG), worth close to $49.9 million, corresponding to 0.7% of its total 13F portfolio. The second largest stake is held by Anchorage Advisors, led by Kevin Michael Ulrich and Anthony Davis, holding a $21.7 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Charles Paquelet’s Skylands Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, key hedge funds have jumped into Metaldyne Performance Group Inc (NYSE:MPG) headfirst. Zebra Capital Management, led by Roger Ibbotson, established the biggest position in Metaldyne Performance Group Inc (NYSE:MPG). According to regulatory filings, the fund had $0.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, one of the largest hedge funds in the world, Peter Muller’s PDT Partners, and Glenn Russell Dubin’s Highbridge Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Metaldyne Performance Group Inc (NYSE:MPG). We will take a look at Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), MBIA Inc. (NYSE:MBI), Tutor Perini Corp (NYSE:TPC), and CONE Midstream Partners LP (NYSE:CNNX). This group of stocks’ market caps resemble MPG’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 12 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $79 million in MPG’s case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand CONE Midstream Partners LP (NYSE:CNNX) is the least popular one with only 3 bullish hedge fund positions. Metaldyne Performance Group Inc (NYSE:MPG) 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 MBI might be a better candidate to consider taking a long position in.