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Is Mitel Networks Corporation (MITL) A Good Stock To Buy?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Mitel Networks Corporation (NASDAQ:MITL).

Mitel Networks Corporation (NASDAQ:MITL) was in 7 hedge funds’ portfolios at the end of September. Mitel Networks Corporation (NASDAQ:MITL) has seen a decrease in support from the world’s most elite money managers of late. There were 9 hedge funds in our database with Mitel Networks Corporation (NASDAQ:MITL) positions at the end of the previous quarter. For those who are aware of the latest stock market environment surrounding the stock, this may not come as a surprise, as the shares of Mitel Networks Corporation (NASDAQ:MITL) declined 26.95% during the quarter.

In order to find out more about the hedge fund behavior, we will also compare Mitel Networks Corporation (NASDAQ:MITL) to other stocks including Glaukos Corp (NYSE:GKOS), GasLog Ltd (NYSE:GLOG), and Par Pacific Holdings, Inc. (NYSEMKT:PARR) to get a better sense of its popularity.

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To most investors, hedge funds are perceived as unimportant, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, our researchers hone in on the bigwigs of this club, about 700 funds. These hedge fund managers handle the lion’s share of the hedge fund industry’s total capital, and by keeping track of their top equity investments, Insider Monkey has discovered many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s take a look at the fresh action regarding Mitel Networks Corporation (NASDAQ:MITL).

How are hedge funds trading Mitel Networks Corporation (NASDAQ:MITL)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 22% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Elliott Management, managed by Paul Singer, holds the most valuable position in Mitel Networks Corporation (NASDAQ:MITL). Elliott Management has a $73.4 million position in the stock, comprising 1.4% of its 13F portfolio. On Elliott Management’s heels is Renaissance Technologies, holding a $8.5 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Clint Carlson’s Carlson Capital, D E Shaw, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Because Mitel Networks Corporation (NASDAQ:MITL) has experienced a falling interest from hedge fund managers, logic holds that there lies a certain “tier” of hedgies who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management dropped the largest stake of the “upper crust” of funds watched by Insider Monkey, worth about $1.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.1 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mitel Networks Corporation (NASDAQ:MITL) but similarly valued. These stocks are Glaukos Corp (NYSE:GKOS), GasLog Ltd (NYSE:GLOG), Par Pacific Holdings, Inc. (NYSEMKT:PARR), and American Railcar Industries, Inc. (NASDAQ:ARII). This group of stocks’ market valuations resemble Mitel Networks Corporation (NASDAQ:MITL)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GKOS 6 79821 -3
GLOG 16 37990 6
PARR 11 219791 -1
ARII 6 446872 -5

As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $90 million in Mitel Networks Corporation (NASDAQ:MITL)’s case. GasLog Ltd (NYSE:GLOG) is the most popular stock in this table. On the other hand, Glaukos Corp (NYSE:GKOS) is the least popular one with only 6 bullish hedge fund positions. Mitel Networks Corporation (NASDAQ:MITL) 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. In this regard, GasLog Ltd (NYSE:GLOG) might be a better candidate to consider a long position.

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