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 MakeMyTrip Limited (NASDAQ:MMYT).
Is MMYT a good stock to buy now? Hedge fund interest in MakeMyTrip Limited (NASDAQ:MMYT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MMYT 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Liberty Latin America Ltd. (NASDAQ:LILA), Ameris Bancorp (NASDAQ:ABCB), and Omega Flex, Inc. (NASDAQ:OFLX) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind let’s review the new hedge fund action regarding MakeMyTrip Limited (NASDAQ:MMYT).
Do Hedge Funds Think MMYT Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MMYT over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Dalton Investments was the largest shareholder of MakeMyTrip Limited (NASDAQ:MMYT), with a stake worth $9.2 million reported as of the end of September. Trailing Dalton Investments was QVT Financial, which amassed a stake valued at $8.6 million. Renaissance Technologies, PAR Capital Management, and Millennium 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 Dalton Investments allocated the biggest weight to MakeMyTrip Limited (NASDAQ:MMYT), around 6.06% of its 13F portfolio. QVT Financial is also relatively very bullish on the stock, earmarking 1.05 percent of its 13F equity portfolio to MMYT.
Since MakeMyTrip Limited (NASDAQ:MMYT) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who were dropping their positions entirely heading into Q4. Interestingly, Thomas E. Claugus’s GMT Capital cut the biggest position of the 750 funds tracked by Insider Monkey, worth close to $3.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $1.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to MakeMyTrip Limited (NASDAQ:MMYT). We will take a look at Liberty Latin America Ltd. (NASDAQ:LILA), Ameris Bancorp (NASDAQ:ABCB), Omega Flex, Inc. (NASDAQ:OFLX), NetScout Systems, Inc. (NASDAQ:NTCT), Washington Federal Inc. (NASDAQ:WAFD), AssetMark Financial Holdings, Inc. (NYSE:AMK), and Helmerich & Payne, Inc. (NYSE:HP). This group of stocks’ market values match MMYT’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 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $29 million in MMYT’s case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 4 bullish hedge fund positions. MakeMyTrip Limited (NASDAQ:MMYT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MMYT is 29.7. 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 MMYT as the stock returned 64.5% 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.