Is MSA Safety Incorporated (MSA) A Good Stock To Buy?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Is MSA Safety Incorporated (NYSE:MSA) undervalued? Hedge funds are turning bullish. The number of long hedge fund positions inched up by 7 lately. Our calculations also showed that MSA isn’t among the 30 most popular stocks among hedge funds.

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 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 32 percentage points since May 2014 through March 12, 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.

Richard Driehaus

Let’s take a peek at the latest hedge fund action surrounding MSA Safety Incorporated (NYSE:MSA).

How are hedge funds trading MSA Safety Incorporated (NYSE:MSA)?

At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 70% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MSA over the last 14 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 MSA Safety Incorporated (NYSE:MSA) was held by AQR Capital Management, which reported holding $24.4 million worth of stock at the end of September. It was followed by Select Equity Group with a $19.5 million position. Other investors bullish on the company included Royce & Associates, Winton Capital Management, and PDT Partners.

As one would reasonably expect, some big names were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, assembled the largest position in MSA Safety Incorporated (NYSE:MSA). Driehaus Capital had $1.5 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $1.4 million position during the quarter. The following funds were also among the new MSA investors: Matthew Tewksbury’s Stevens Capital Management, Israel Englander’s Millennium Management, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s check out hedge fund activity in other stocks similar to MSA Safety Incorporated (NYSE:MSA). We will take a look at SLM Corp (NASDAQ:SLM), Vipshop Holdings Limited (NYSE:VIPS), Skechers USA Inc (NYSE:SKX), and Brighthouse Financial, Inc. (NASDAQ:BHF). This group of stocks’ market values are similar to MSA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLM 24 492797 5
VIPS 22 120976 0
SKX 25 259895 5
BHF 24 377797 2
Average 23.75 312866 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $79 million in MSA’s case. Skechers USA Inc (NYSE:SKX) is the most popular stock in this table. On the other hand Vipshop Holdings Limited (NYSE:VIPS) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks MSA Safety Incorporated (NYSE:MSA) is even less popular than VIPS. Hedge funds dodged a bullet by taking a bearish stance towards MSA. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MSA wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); MSA investors were disappointed as the stock returned 11.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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