In this article we will check out the progression of hedge fund sentiment towards MDU Resources Group Inc (NYSE:MDU) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
MDU Resources Group Inc (NYSE:MDU) has seen a decrease in enthusiasm from smart money lately. MDU was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with MDU positions at the end of the previous quarter. Our calculations also showed that MDU 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are tons of methods investors employ to grade publicly traded companies. Some of the most innovative methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top money managers can beat the broader indices by a healthy amount (see the details here).
Joel Greenblatt of Gotham Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the latest hedge fund action regarding MDU Resources Group Inc (NYSE:MDU).
What have hedge funds been doing with MDU Resources Group Inc (NYSE:MDU)?
Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in MDU a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in MDU Resources Group Inc (NYSE:MDU) was held by Renaissance Technologies, which reported holding $37.1 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $32.5 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to MDU Resources Group Inc (NYSE:MDU), around 1.15% of its 13F portfolio. Centenus Global Management is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to MDU.
Seeing as MDU Resources Group Inc (NYSE:MDU) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few hedge funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management dumped the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $44.6 million in stock. Brian Olson, Baehyun Sung, and Jamie Waters’s fund, Blackstart Capital, also dropped its stock, about $7.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MDU Resources Group Inc (NYSE:MDU) but similarly valued. These stocks are Science Applications International Corp (NYSE:SAIC), JOYY Inc. (NASDAQ:YY), LPL Financial Holdings Inc (NASDAQ:LPLA), and Cousins Properties Incorporated (NYSE:CUZ). This group of stocks’ market caps are closest to MDU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAIC | 34 | 371964 | 7 |
| YY | 15 | 209246 | -8 |
| LPLA | 33 | 747511 | -8 |
| CUZ | 22 | 76929 | 10 |
| Average | 26 | 351413 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $183 million in MDU’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand JOYY Inc. (NASDAQ:YY) is the least popular one with only 15 bullish hedge fund positions. MDU Resources Group Inc (NYSE:MDU) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately MDU wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MDU investors were disappointed as the stock returned 6.4% during the second quarter 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.
Follow Mdu Resources Group Inc (NYSE:MDU)
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Disclosure: None. This article was originally published at Insider Monkey.
