We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Marine Products Corp. (NYSE:MPX).
Is Marine Products (MPX) a good stock to buy now? MPX shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of September. Our calculations also showed that MPX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare MPX to other stocks including SurModics, Inc. (NASDAQ:SRDX), Washington Trust Bancorp (NASDAQ:WASH), and Scholar Rock Holding Corporation (NASDAQ:SRRK) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we’re going to take a peek at the fresh hedge fund action surrounding Marine Products Corp. (NYSE:MPX).
Hedge fund activity in Marine Products Corp. (NYSE:MPX)
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MPX over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Marine Products Corp. (NYSE:MPX) was held by GAMCO Investors, which reported holding $11.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.6 million position. Other investors bullish on the company included Arrowstreet Capital, PEAK6 Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Marine Products Corp. (NYSE:MPX), around 0.12% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to MPX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Zebra Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PDT Partners).
Let’s go over hedge fund activity in other stocks similar to Marine Products Corp. (NYSE:MPX). These stocks are SurModics, Inc. (NASDAQ:SRDX), Washington Trust Bancorp (NASDAQ:WASH), Scholar Rock Holding Corporation (NASDAQ:SRRK), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), Hycroft Mining Holding Corporation (NASDAQ:HYMC), Radius Health Inc (NASDAQ:RDUS), and Yintech Investment Holdings Limited (NASDAQ:YIN). This group of stocks’ market values resemble MPX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $15 million in MPX’s case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Yintech Investment Holdings Limited (NASDAQ:YIN) is the least popular one with only 3 bullish hedge fund positions. Marine Products Corp. (NYSE:MPX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MPX is 35.3. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately MPX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MPX investors were disappointed as the stock returned 7% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.