Is Mallinckrodt plc (MNK) A Good Stock To Buy?

Insider Monkey finished processing more than 700 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2018. What do these smart investors think about Mallinckrodt plc (NYSE:MNK)?

Mallinckrodt plc (NYSE:MNK) was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2018. MNK has seen an increase in activity from the world’s largest hedge funds in recent months. There were 20 hedge funds in our database with MNK holdings at the end of the previous quarter. Our calculations also showed that MNK isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


We’re going to take a gander at the recent hedge fund action regarding Mallinckrodt plc (NYSE:MNK).

How have hedgies been trading Mallinckrodt plc (NYSE:MNK)?

At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in MNK a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).


Among these funds, D E Shaw held the most valuable stake in Mallinckrodt plc (NYSE:MNK), which was worth $71.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $38 million worth of shares. Moreover, Armistice Capital, Renaissance Technologies, and Royce & Associates were also bullish on Mallinckrodt plc (NYSE:MNK), allocating a large percentage of their portfolios to this stock.

Now, some big names have jumped into Mallinckrodt plc (NYSE:MNK) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Mallinckrodt plc (NYSE:MNK). Arrowstreet Capital had $5.8 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $3.5 million position during the quarter. The other funds with new positions in the stock are Lee Ainslie’s Maverick Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and David Costen Haley’s HBK Investments.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mallinckrodt plc (NYSE:MNK) but similarly valued. We will take a look at Instructure, Inc. (NYSE:INST), Aircastle Limited (NYSE:AYR), AAR Corp. (NYSE:AIR), and Gray Television, Inc. (NYSE:GTN). This group of stocks’ market values are closest to MNK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INST 22 324837 4
AYR 13 80135 -2
AIR 14 76389 -8
GTN 26 215224 4
Average 18.75 174146 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $224 million in MNK’s case. Gray Television, Inc. (NYSE:GTN) is the most popular stock in this table. On the other hand Aircastle Limited (NYSE:AYR) is the least popular one with only 13 bullish hedge fund positions. Mallinckrodt plc (NYSE:MNK) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MNK wasn’t nearly as popular as these 15 stock and hedge funds that were betting on MNK were disappointed as the stock returned 12.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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