Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Medpace Holdings, Inc. (NASDAQ:MEDP).
Is Medpace Holdings, Inc. (NASDAQ:MEDP) a superb investment right now? The smart money is becoming less confident. The number of bullish hedge fund bets were cut by 3 in recent months. Our calculations also showed that medp isn’t among the 30 most popular stocks among hedge funds. MEDP was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 26 hedge funds in our database with MEDP holdings at the end of the previous quarter.
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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a glance at the recent hedge fund action encompassing Medpace Holdings, Inc. (NASDAQ:MEDP).
How have hedgies been trading Medpace Holdings, Inc. (NASDAQ:MEDP)?
Heading into the first quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MEDP over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in Medpace Holdings, Inc. (NASDAQ:MEDP), worth close to $25.9 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $23.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and Noam Gottesman’s GLG Partners.
Due to the fact that Medpace Holdings, Inc. (NASDAQ:MEDP) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies who sold off their full holdings last quarter. Intriguingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors cut the biggest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $1.8 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dumped about $1.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Medpace Holdings, Inc. (NASDAQ:MEDP) but similarly valued. These stocks are Commercial Metals Company (NYSE:CMC), Brooks Automation, Inc. (NASDAQ:BRKS), Wingstop Inc (NASDAQ:WING), and First Bancorp (NYSE:FBP). All of these stocks’ market caps are closest to MEDP’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 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $171 million in MEDP’s case. Wingstop Inc (NASDAQ:WING) is the most popular stock in this table. On the other hand Brooks Automation, Inc. (NASDAQ:BRKS) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Medpace Holdings, Inc. (NASDAQ:MEDP) is more popular among hedge funds. 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 MEDP wasn’t nearly as popular as these 15 stock and hedge funds that were betting on MEDP were disappointed as the stock returned 4.1% 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.