At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Mohawk Industries, Inc. (NYSE:MHK).
Is MHK a good stock to buy now? Money managers were getting more bullish. The number of bullish hedge fund positions increased by 9 recently. Mohawk Industries, Inc. (NYSE:MHK) was in 41 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 64. Our calculations also showed that MHK 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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 15 best blue chip stocks to buy 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 we’re going to review the recent hedge fund action encompassing Mohawk Industries, Inc. (NYSE:MHK).
Do Hedge Funds Think MHK Is A Good Stock To Buy Now?
At the end of September, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in MHK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Richard S. Pzena’s Pzena Investment Management has the most valuable position in Mohawk Industries, Inc. (NYSE:MHK), worth close to $213 million, accounting for 1.3% of its total 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, led by John W. Rogers, holding a $110.1 million position; 1.6% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish include Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Cobalt Capital Management allocated the biggest weight to Mohawk Industries, Inc. (NYSE:MHK), around 2.21% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, earmarking 2.18 percent of its 13F equity portfolio to MHK.
As aggregate interest increased, key money managers have jumped into Mohawk Industries, Inc. (NYSE:MHK) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, created the biggest position in Mohawk Industries, Inc. (NYSE:MHK). Laurion Capital Management had $15.6 million invested in the company at the end of the quarter. Robert Bishop’s Impala Asset Management also initiated a $11.8 million position during the quarter. The following funds were also among the new MHK investors: Andrew Kurita’s Kettle Hill Capital Management, Steve Cohen’s Point72 Asset Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Mohawk Industries, Inc. (NYSE:MHK) but similarly valued. We will take a look at GFL Environmental Inc. (NYSE:GFL), argenx SE (NASDAQ:ARGX), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), The Mosaic Company (NYSE:MOS), Cabot Oil & Gas Corporation (NYSE:COG), Tandem Diabetes Care Inc (NASDAQ:TNDM), and Morningstar, Inc. (NASDAQ:MORN). This group of stocks’ market valuations are closest to MHK’s market valuation.
|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 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $543 million. That figure was $702 million in MHK’s case. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is the most popular stock in this table. On the other hand GFL Environmental Inc. (NYSE:GFL) is the least popular one with only 20 bullish hedge fund positions. Mohawk Industries, Inc. (NYSE:MHK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MHK is 62. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on MHK as the stock returned 34.8% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.