Is MNK A Good Stock To Buy Now?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Mallinckrodt Public Limited Company (NYSE:MNK) based on those filings.

Is MNK a good stock to buy now? Money managers were becoming less hopeful. The number of bullish hedge fund positions retreated by 2 lately. Mallinckrodt Public Limited Company (NYSE:MNK) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 40. Our calculations also showed that MNK 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’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.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

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 take a look at the key hedge fund action regarding Mallinckrodt Public Limited Company (NYSE:MNK).

Do Hedge Funds Think MNK Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in MNK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MNK A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Armistice Capital, managed by Steven Boyd, holds the most valuable position in Mallinckrodt Public Limited Company (NYSE:MNK). Armistice Capital has a $3.9 million call position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is James E. Flynn of Deerfield Management, with a $1.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions contain Cliff Asness’s AQR Capital Management, and Sander Gerber’s Hudson Bay Capital Management. In terms of the portfolio weights assigned to each position Armistice Capital allocated the biggest weight to Mallinckrodt Public Limited Company (NYSE:MNK), around 0.14% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to MNK.

Judging by the fact that Mallinckrodt Public Limited Company (NYSE:MNK) has experienced falling interest from hedge fund managers, logic holds that there was a specific group of fund managers that slashed their entire stakes by the end of the third quarter. At the top of the heap, Mark T. Gallogly’s Centerbridge Partners cut the biggest investment of all the hedgies followed by Insider Monkey, comprising about $3.1 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $1.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Mallinckrodt Public Limited Company (NYSE:MNK). These stocks are First United Corp (NASDAQ:FUNC), Boxlight Corporation (NASDAQ:BOXL), Ur-Energy Inc. (NYSE:URG), Beam Global (NASDAQ:BEEM), The Alkaline Water Company Inc. (NASDAQ:WTER), Enlivex Therapeutics Ltd. (NASDAQ:ENLV), and Corenergy Infrastructure Trust Inc (NYSE:CORR). All of these stocks’ market caps are closest to MNK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FUNC 4 3568 0
BOXL 1 1285 0
URG 3 2681 1
BEEM 5 8317 2
WTER 3 2527 1
ENLV 1 1773 -2
CORR 6 6885 -3
Average 3.3 3862 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $3 million in MNK’s case. Corenergy Infrastructure Trust Inc (NYSE:CORR) is the most popular stock in this table. On the other hand Boxlight Corporation (NASDAQ:BOXL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Mallinckrodt Public Limited Company (NYSE:MNK) is more popular among hedge funds. Our overall hedge fund sentiment score for MNK 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately MNK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MNK were disappointed as the stock returned -81.3% since the end of the third quarter (through 12/8) 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 in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.