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Here’s What Hedge Funds Think About MSCI Inc (MSCI)

“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards MSCI Inc (NYSE:MSCI) and see how it was affected.

Is MSCI Inc (NYSE:MSCI) the right pick for your portfolio? Prominent investors are selling. The number of long hedge fund positions retreated by 2 in recent months. Our calculations also showed that MSCI isn’t among the 30 most popular stocks among hedge funds.

To the average investor there are a lot of signals market participants have at their disposal to grade stocks. Two of the less known signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the broader indices by a significant margin (see the details here).

Bruce Kovner, Caxton Associates LP

We’re going to take a peek at the recent hedge fund action regarding MSCI Inc (NYSE:MSCI).

How are hedge funds trading MSCI Inc (NYSE:MSCI)?

At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in MSCI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MSCI_jun2019

The largest stake in MSCI Inc (NYSE:MSCI) was held by Renaissance Technologies, which reported holding $188.2 million worth of stock at the end of March. It was followed by GLG Partners with a $78.3 million position. Other investors bullish on the company included Kylin Management, Arrowstreet Capital, and Harbor Spring Capital.

Due to the fact that MSCI Inc (NYSE:MSCI) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Intriguingly, Steve Cohen’s Point72 Asset Management cut the biggest investment of all the hedgies monitored by Insider Monkey, totaling about $8.3 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund said goodbye to about $1.4 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to MSCI Inc (NYSE:MSCI). These stocks are Continental Resources, Inc. (NYSE:CLR), First Republic Bank (NYSE:FRC), AmerisourceBergen Corporation (NYSE:ABC), and Deutsche Bank AG (NYSE:DB). This group of stocks’ market caps are similar to MSCI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLR 31 559307 -5
FRC 18 683851 3
ABC 28 677582 -6
DB 13 1074334 -1
Average 22.5 748769 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $749 million. That figure was $631 million in MSCI’s case. Continental Resources, Inc. (NYSE:CLR) is the most popular stock in this table. On the other hand Deutsche Bank AG (NYSE:DB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks MSCI Inc (NYSE:MSCI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MSCI as the stock returned 12.3% during the same period 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.

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

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