Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Matson Inc. (NYSE:MATX).
Is MATX a good stock to buy now? Hedge fund interest in Matson Inc. (NYSE:MATX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MATX 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 MATX to other stocks including Cathay General Bancorp (NASDAQ:CATY), Independent Bank Corp (NASDAQ:INDB), and Kura Oncology, Inc. (NASDAQ:KURA) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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 let’s view the key hedge fund action surrounding Matson Inc. (NYSE:MATX).
Do Hedge Funds Think MATX Is A Good Stock To Buy Now?
At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in MATX over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in Matson Inc. (NYSE:MATX), which was worth $5.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $3.4 million worth of shares. Arrowstreet Capital, D E Shaw, and Bridgewater Associates 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 Engineers Gate Manager allocated the biggest weight to Matson Inc. (NYSE:MATX), around 0.01% of its 13F portfolio. Bridgewater Associates is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to MATX.
Because Matson Inc. (NYSE:MATX) has faced falling interest from hedge fund managers, we can see that there lies a certain “tier” of fund managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Douglas Dossey and Arthur Young’s Tensile Capital said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $5.4 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also sold off its stock, about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Matson Inc. (NYSE:MATX). These stocks are Cathay General Bancorp (NASDAQ:CATY), Independent Bank Corp (NASDAQ:INDB), Kura Oncology, Inc. (NASDAQ:KURA), AlloVir, Inc. (NASDAQ:ALVR), Six Flags Entertainment Corp (NYSE:SIX), AMTD International Inc. (NYSE:HKIB), and MaxLinear, Inc. (NYSE:MXL). This group of stocks’ market caps resemble MATX’s market cap.
|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 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $12 million in MATX’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand AMTD International Inc. (NYSE:HKIB) is the least popular one with only 1 bullish hedge fund positions. Matson Inc. (NYSE:MATX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MATX is 31.1. 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. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on MATX as the stock returned 43.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.