Is Motorcar Parts of America, Inc. (MPAA) A Good Stock To Buy?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Motorcar Parts of America, Inc. (NASDAQ:MPAA).

Motorcar Parts of America, Inc. (NASDAQ:MPAA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of September. Our calculations also showed that MPAA 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 IMV Inc. (NASDAQ:IMV), Spark Energy, Inc. (NASDAQ:SPKE), and Tufin Software Technologies Ltd. (NYSE:TUFN) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment 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 gander at the fresh hedge fund action surrounding Motorcar Parts of America, Inc. (NASDAQ:MPAA).

What does smart money think about Motorcar Parts of America, Inc. (NASDAQ:MPAA)?

At third quarter’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MPAA over the last 21 quarters. 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, Pzena Investment Management was the largest shareholder of Motorcar Parts of America, Inc. (NASDAQ:MPAA), with a stake worth $29.8 million reported as of the end of September. Trailing Pzena Investment Management was Private Capital Management, which amassed a stake valued at $17.8 million. Rutabaga Capital Management, Royce & Associates, and Arrowstreet Capital 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 Private Capital Management allocated the biggest weight to Motorcar Parts of America, Inc. (NASDAQ:MPAA), around 4.08% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, earmarking 2.2 percent of its 13F equity portfolio to MPAA.

Since Motorcar Parts of America, Inc. (NASDAQ:MPAA) has witnessed bearish sentiment from hedge fund managers, we can see that there were a few funds who sold off their positions entirely last quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest stake of the 750 funds followed by Insider Monkey, comprising an estimated $2.9 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dropped about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Motorcar Parts of America, Inc. (NASDAQ:MPAA) but similarly valued. We will take a look at IMV Inc. (NASDAQ:IMV), Spark Energy, Inc. (NASDAQ:SPKE), Tufin Software Technologies Ltd. (NYSE:TUFN), Fossil Group Inc (NASDAQ:FOSL), Aspen Aerogels Inc (NYSE:ASPN), Lydall, Inc. (NYSE:LDL), and CRA International, Inc. (NASDAQ:CRAI). This group of stocks’ market valuations are similar to MPAA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IMV 5 2308 4
SPKE 7 11538 0
TUFN 9 3630 4
FOSL 11 45755 2
ASPN 5 18039 -2
LDL 12 48365 0
CRAI 12 31116 0
Average 8.7 22964 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $54 million in MPAA’s case. Lydall, Inc. (NYSE:LDL) is the most popular stock in this table. On the other hand IMV Inc. (NASDAQ:IMV) is the least popular one with only 5 bullish hedge fund positions. Motorcar Parts of America, Inc. (NASDAQ:MPAA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MPAA is 39.8. 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. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on MPAA as the stock returned 37.3% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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