In this article we are going to use hedge fund sentiment as a tool and determine whether Mizuho Financial Group Inc. (NYSE:MFG) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Mizuho Financial (MFG) a good stock to buy now? MFG investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Mizuho Financial Group Inc. (NYSE:MFG) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. There were 8 hedge funds in our database with MFG holdings at the end of June. Our calculations also showed that MFG 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.
To the average investor there are numerous metrics stock traders employ to value their stock investments. Two of the less known metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a solid amount (see the details here).
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. Now let’s analyze the latest hedge fund action encompassing Mizuho Financial Group Inc. (NYSE:MFG).
How have hedgies been trading Mizuho Financial Group Inc. (NYSE:MFG)?
At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in MFG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Mizuho Financial Group Inc. (NYSE:MFG), with a stake worth $10.8 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $0.7 million. LMR Partners, Arrowstreet Capital, and Paloma 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 Renaissance Technologies allocated the biggest weight to Mizuho Financial Group Inc. (NYSE:MFG), around 0.01% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to MFG.
Judging by the fact that Mizuho Financial Group Inc. (NYSE:MFG) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of funds that slashed their entire stakes by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $0.4 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $0.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Mizuho Financial Group Inc. (NYSE:MFG). We will take a look at Amphenol Corporation (NYSE:APH), TE Connectivity Ltd. (NYSE:TEL), SYSCO Corporation (NYSE:SYY), Cummins Inc. (NYSE:CMI), IHS Markit Ltd. (NYSE:INFO), Walgreens Boots Alliance Inc (NASDAQ:WBA), and Agilent Technologies Inc. (NYSE:A). This group of stocks’ market valuations are similar to MFG’s market valuation.
|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 40 hedge funds with bullish positions and the average amount invested in these stocks was $1548 million. That figure was $12 million in MFG’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand TE Connectivity Ltd. (NYSE:TEL) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Mizuho Financial Group Inc. (NYSE:MFG) is even less popular than TEL. Our overall hedge fund sentiment score for MFG is 20.8. 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. Hedge funds dodged a bullet by taking a bearish stance towards MFG. Our calculations showed that the top 20 most popular hedge fund stocks 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 November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately MFG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MFG investors were disappointed as the stock returned 4.7% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.