With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Methode Electronics Inc. (NYSE:MEI).
Is MEI a good stock to buy now? Methode Electronics Inc. (NYSE:MEI) has seen a decrease in hedge fund sentiment recently. Methode Electronics Inc. (NYSE:MEI) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 23. There were 12 hedge funds in our database with MEI holdings at the end of June. Our calculations also showed that MEI 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most investors, hedge funds are viewed as worthless, old financial tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers look at the elite of this group, around 850 funds. It is estimated that this group of investors have their hands on the lion’s share of the smart money’s total asset base, and by shadowing their highest performing investments, Insider Monkey has discovered many investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. Keeping this in mind we’re going to review the recent hedge fund action surrounding Methode Electronics Inc. (NYSE:MEI).
Do Hedge Funds Think MEI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MEI over the last 21 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Ariel Investments held the most valuable stake in Methode Electronics Inc. (NYSE:MEI), which was worth $26.3 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $16.1 million worth of shares. Arrowstreet Capital, Renaissance Technologies, and AQR Capital Management 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 Ariel Investments allocated the biggest weight to Methode Electronics Inc. (NYSE:MEI), around 0.38% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to MEI.
Because Methode Electronics Inc. (NYSE:MEI) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies who were dropping their positions entirely last quarter. It’s worth mentioning that Michael Gelband’s ExodusPoint Capital sold off the biggest position of the 750 funds watched by Insider Monkey, worth an estimated $1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $0.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Methode Electronics Inc. (NYSE:MEI). These stocks are The Liberty Braves Group (NASDAQ:BATRA), Akero Therapeutics, Inc. (NASDAQ:AKRO), Gol Linhas Aereas Inteligentes SA (NYSE:GOL), Central European Media Enterprises Ltd. (NASDAQ:CETV), Community Healthcare Trust Inc (NYSE:CHCT), Virtus Investment Partners Inc (NASDAQ:VRTS), and Evolent Health Inc (NYSE:EVH). This group of stocks’ market values match MEI’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 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $68 million in MEI’s case. Evolent Health Inc (NYSE:EVH) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 10 bullish hedge fund positions. Methode Electronics Inc. (NYSE:MEI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MEI is 23.3. 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. 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 MEI as the stock returned 33.9% 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.