Is MSA A Good Stock To Buy Now?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about MSA Safety Incorporated (NYSE:MSA) in this article.

Is MSA a good stock to buy now? Money managers were turning less bullish. The number of long hedge fund bets shrunk by 12 lately. MSA Safety Incorporated (NYSE:MSA) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 26. Our calculations also showed that MSA 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). There were 26 hedge funds in our database with MSA holdings at the end of June.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

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 view the new hedge fund action encompassing MSA Safety Incorporated (NYSE:MSA).

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

At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -46% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in MSA a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is MSA A Good Stock To Buy?

The largest stake in MSA Safety Incorporated (NYSE:MSA) was held by Impax Asset Management, which reported holding $3.4 million worth of stock at the end of September. It was followed by PDT Partners with a $2.7 million position. Other investors bullish on the company included Renaissance Technologies, PEAK6 Capital Management, and Holocene Advisors. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to MSA Safety Incorporated (NYSE:MSA), around 0.18% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to MSA.

Since MSA Safety Incorporated (NYSE:MSA) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who sold off their full holdings by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $18 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $8.4 million worth. These moves are important to note, as total hedge fund interest was cut by 12 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MSA Safety Incorporated (NYSE:MSA) but similarly valued. We will take a look at Lithia Motors Inc (NYSE:LAD), Jabil Inc. (NYSE:JBL), Dicks Sporting Goods Inc (NYSE:DKS), Flowers Foods, Inc. (NYSE:FLO), Tetra Tech, Inc. (NASDAQ:TTEK), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), and Sonoco Products Company (NYSE:SON). All of these stocks’ market caps are closest to MSA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAD 49 1149267 18
JBL 31 399819 0
DKS 41 626418 1
FLO 30 298843 6
TTEK 22 88894 3
AVAL 4 9119 -5
SON 29 149777 4
Average 29.4 388877 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $19 million in MSA’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 bullish hedge fund positions. MSA Safety Incorporated (NYSE:MSA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MSA is 20.3. 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 MSA as the stock returned 13.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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