While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Magna International Inc. (NYSE:MGA).
Is MGA stock a buy or sell? Money managers were getting more optimistic. The number of long hedge fund bets went up by 17 in recent months. Magna International Inc. (NYSE:MGA) was in 38 hedge funds’ portfolios at the end of December. The all time high for this statistic is 43. Our calculations also showed that MGA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 let’s take a gander at the key hedge fund action encompassing Magna International Inc. (NYSE:MGA).
Do Hedge Funds Think MGA Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 81% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in MGA a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Magna International Inc. (NYSE:MGA), which was worth $141.2 million at the end of the fourth quarter. On the second spot was Moore Global Investments which amassed $110.1 million worth of shares. East Side Capital (RR Partners), D E Shaw, and GLG Partners 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 East Side Capital (RR Partners) allocated the biggest weight to Magna International Inc. (NYSE:MGA), around 9.24% of its 13F portfolio. Heathbridge Capital Management is also relatively very bullish on the stock, dishing out 5.38 percent of its 13F equity portfolio to MGA.
As one would reasonably expect, key money managers have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, initiated the largest position in Magna International Inc. (NYSE:MGA). Moore Global Investments had $110.1 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also initiated a $48.7 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Till Bechtolsheimer’s Arosa Capital Management, and Michael Cowley’s Sandbar Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Magna International Inc. (NYSE:MGA) but similarly valued. These stocks are Altice USA, Inc. (NYSE:ATUS), CBRE Group, Inc. (NYSE:CBRE), West Pharmaceutical Services Inc. (NYSE:WST), United Microelectronics Corp (NYSE:UMC), Zebra Technologies Corporation (NASDAQ:ZBRA), CGI Inc. (NYSE:GIB), and Canon Inc. (NYSE:CAJ). This group of stocks’ market values are similar to MGA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1191 million. That figure was $662 million in MGA’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. Magna International Inc. (NYSE:MGA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGA is 68.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on MGA as the stock returned 30.3% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.