Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Moog Inc (NYSE:MOG-A) to find out whether it was one of their high conviction long-term ideas.
Is Moog Inc (NYSE:MOG) an outstanding investment right now? The best stock pickers are taking an optimistic view. The number of bullish hedge fund positions advanced by 4 lately. Our calculations also showed that MOG isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
We’re going to review the latest hedge fund action surrounding Moog Inc (NYSE:MOG).
What does smart money think about Moog Inc (NYSE:MOG)?
At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MOG over the last 15 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Moog Inc (NYSE:MOG), which was worth $34.2 million at the end of the first quarter. On the second spot was Millennium Management which amassed $16.8 million worth of shares. Moreover, AQR Capital Management, GAMCO Investors, and GLG Partners were also bullish on Moog Inc (NYSE:MOG), allocating a large percentage of their portfolios to this stock.
Now, some big names have jumped into Moog Inc (NYSE:MOG) headfirst. Millennium Management, managed by Israel Englander, assembled the biggest position in Moog Inc (NYSE:MOG). Millennium Management had $16.8 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $1.2 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Matthew Hulsizer’s PEAK6 Capital Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Moog Inc (NYSE:MOG) but similarly valued. We will take a look at Kennametal Inc. (NYSE:KMT), Q2 Holdings Inc (NYSE:QTWO), Red Rock Resorts, Inc. (NASDAQ:RRR), and Corporate Office Properties Trust (NYSE:OFC). All of these stocks’ market caps are closest to MOG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KMT | 20 | 271144 | -1 |
| QTWO | 15 | 67077 | 3 |
| RRR | 17 | 377954 | 0 |
| OFC | 12 | 156974 | -11 |
| Average | 16 | 218287 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $91 million in MOG’s case. Kennametal Inc. (NYSE:KMT) is the most popular stock in this table. On the other hand Corporate Office Properties Trust (NYSE:OFC) is the least popular one with only 12 bullish hedge fund positions. Moog Inc (NYSE:MOG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately MOG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MOG were disappointed as the stock returned -1.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
