While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Moelis & Company (NYSE:MC).
Is MC a good stock to buy now? Moelis & Company (NYSE:MC) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. MC investors should pay attention to an increase in hedge fund interest of late. There were 8 hedge funds in our database with MC positions at the end of the second quarter. Our calculations also showed that MC 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.
Dmitry Balyasny of Balyasny Asset 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. Now let’s take a look at the new hedge fund action regarding Moelis & Company (NYSE:MC).
Do Hedge Funds Think MC Is A Good Stock To Buy Now?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 63% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in MC over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Moelis & Company (NYSE:MC) was held by Royce & Associates, which reported holding $35.5 million worth of stock at the end of September. It was followed by Heard Capital with a $12.5 million position. Other investors bullish on the company included Balyasny Asset Management, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Heard Capital allocated the biggest weight to Moelis & Company (NYSE:MC), around 5.13% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.38 percent of its 13F equity portfolio to MC.
Now, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Moelis & Company (NYSE:MC). Balyasny Asset Management had $6.5 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $1.2 million investment in the stock during the quarter. The other funds with brand new MC positions are Mika Toikka’s AlphaCrest Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Parvinder Thiara’s Athanor Capital.
Let’s also examine hedge fund activity in other stocks similar to Moelis & Company (NYSE:MC). These stocks are Associated Banc Corp (NYSE:ASB), Integer Holdings Corporation (NYSE:ITGR), South Jersey Industries Inc (NYSE:SJI), Medifast, Inc. (NYSE:MED), Brinker International, Inc. (NYSE:EAT), Visteon Corp (NASDAQ:VC), and Cardlytics, Inc. (NASDAQ:CDLX). This group of stocks’ market caps are similar to MC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASB | 21 | 177092 | -1 |
| ITGR | 22 | 145970 | 5 |
| SJI | 13 | 80266 | -1 |
| MED | 21 | 316364 | 3 |
| EAT | 35 | 437585 | 8 |
| VC | 28 | 319170 | 5 |
| CDLX | 29 | 599537 | 2 |
| Average | 24.1 | 296569 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $68 million in MC’s case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Moelis & Company (NYSE:MC) is even less popular than SJI. Our overall hedge fund sentiment score for MC is 27. 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 clearly dropped the ball on MC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 MC as the stock returned 24% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
