Is Matrix Service Co (MTRX) Going to Burn These Hedge Funds?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Matrix Service Co (NASDAQ:MTRX) based on those filings.

Is Matrix Service Co (NASDAQ:MTRX) an outstanding investment now? Money managers are getting less optimistic. The number of bullish hedge fund bets fell by 3 lately. Our calculations also showed that MTRX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). MTRX was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 18 hedge funds in our database with MTRX holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are perceived as worthless, outdated financial tools of yesteryear. While there are over 8000 funds in operation today, We hone in on the elite of this group, about 850 funds. These money managers orchestrate most of all hedge funds’ total capital, and by watching their finest picks, Insider Monkey has identified a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Arnaud Ajdler Engine Capital

Arnaud Ajdler of Engine Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the latest hedge fund action surrounding Matrix Service Co (NASDAQ:MTRX).

How have hedgies been trading Matrix Service Co (NASDAQ:MTRX)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in MTRX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Matrix Service Co (NASDAQ:MTRX) was held by Engine Capital, which reported holding $3.8 million worth of stock at the end of September. It was followed by Rutabaga Capital Management with a $3.2 million position. Other investors bullish on the company included D E Shaw, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to Matrix Service Co (NASDAQ:MTRX), around 1.96% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, designating 1.92 percent of its 13F equity portfolio to MTRX.

Judging by the fact that Matrix Service Co (NASDAQ:MTRX) has experienced bearish sentiment from the smart money, we can see that there is a sect of hedgies who sold off their positions entirely last quarter. Intriguingly, Noam Gottesman’s GLG Partners dumped the largest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $2.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $1.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Matrix Service Co (NASDAQ:MTRX) but similarly valued. We will take a look at Leju Holdings Ltd (NYSE:LEJU), Corenergy Infrastructure Trust Inc (NYSE:CORR), NVE Corporation (NASDAQ:NVEC), and Lawson Products, Inc. (NASDAQ:LAWS). This group of stocks’ market valuations are closest to MTRX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LEJU 1 2398 0
CORR 9 24575 -1
NVEC 9 18225 -1
LAWS 7 15303 0
Average 6.5 15125 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $15 million in MTRX’s case. Corenergy Infrastructure Trust Inc (NYSE:CORR) is the most popular stock in this table. On the other hand Leju Holdings Ltd (NYSE:LEJU) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Matrix Service Co (NASDAQ:MTRX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately MTRX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MTRX were disappointed as the stock returned 2% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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