Here is What Hedge Funds Think About MP Materials Corp. (MP)

In this article we will analyze whether MP Materials Corp. (NYSE:MP) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is MP Materials Corp. (NYSE:MP) a buy, sell, or hold? Money managers were becoming less confident. The number of bullish hedge fund positions were cut by 3 in recent months. MP Materials Corp. (NYSE:MP) was in 29 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that MP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you’d ask most stock holders, hedge funds are perceived as worthless, old investment tools of years past. While there are greater than 8000 funds in operation today, Our researchers hone in on the elite of this club, around 850 funds. These hedge fund managers have their hands on bulk of all hedge funds’ total asset base, and by watching their inimitable investments, Insider Monkey has found numerous investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Andrew Sandler of Sandler Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the key hedge fund action surrounding MP Materials Corp. (NYSE:MP).

Do Hedge Funds Think MP Is A Good Stock To Buy Now?

At first quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in MP a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MP A Good Stock To Buy?

Among these funds, JHL Capital Group held the most valuable stake in MP Materials Corp. (NYSE:MP), which was worth $1589.3 million at the end of the fourth quarter. On the second spot was QVT Financial which amassed $763 million worth of shares. Omega Advisors, Athanor Capital, and Aristeia Capital 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 JHL Capital Group allocated the biggest weight to MP Materials Corp. (NYSE:MP), around 100% of its 13F portfolio. QVT Financial is also relatively very bullish on the stock, setting aside 53.32 percent of its 13F equity portfolio to MP.

Seeing as MP Materials Corp. (NYSE:MP) has experienced falling interest from the smart money, we can see that there is a sect of fund managers that slashed their full holdings by the end of the first quarter. Intriguingly, David Greenspan’s Slate Path Capital said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, totaling about $128.7 million in stock. Louis Bacon’s fund, Moore Global Investments, also dumped its stock, about $44.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MP Materials Corp. (NYSE:MP) but similarly valued. We will take a look at Lattice Semiconductor Corporation (NASDAQ:LSCC), Coursera, Inc. (NYSE:COUR), Cimarex Energy Co (NYSE:XEC), Allakos Inc. (NASDAQ:ALLK), Nexstar Media Group, Inc. (NASDAQ:NXST), loanDepot, Inc. (NYSE:LDI), and Gildan Activewear Inc (NYSE:GIL). This group of stocks’ market valuations are similar to MP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LSCC 24 276967 1
COUR 25 119794 25
XEC 39 775009 5
ALLK 13 456292 2
NXST 35 945735 -9
LDI 6 8347 6
GIL 17 643419 0
Average 22.7 460795 4.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $461 million. That figure was $2624 million in MP’s case. Cimarex Energy Co (NYSE:XEC) is the most popular stock in this table. On the other hand loanDepot, Inc. (NYSE:LDI) is the least popular one with only 6 bullish hedge fund positions. MP Materials Corp. (NYSE:MP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MP is 64. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately MP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MP were disappointed as the stock returned 4.5% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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