Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about MSCI Inc (NYSE:MSCI).
Is MSCI a good stock to buy? MSCI Inc (NYSE:MSCI) has seen a decrease in hedge fund interest of late. MSCI Inc (NYSE:MSCI) was in 38 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that MSCI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates LP
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a peek at the key hedge fund action encompassing MSCI Inc (NYSE:MSCI).
Do Hedge Funds Think MSCI Is A Good Stock To Buy Now?
At the end of March, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in MSCI a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Echo Street Capital Management held the most valuable stake in MSCI Inc (NYSE:MSCI), which was worth $109 million at the end of the fourth quarter. On the second spot was Fundsmith LLP which amassed $87.5 million worth of shares. Arrowstreet Capital, Fisher Asset Management, and Atalan 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 Kadensa Capital allocated the biggest weight to MSCI Inc (NYSE:MSCI), around 14.83% of its 13F portfolio. Harbor Spring Capital is also relatively very bullish on the stock, setting aside 4.88 percent of its 13F equity portfolio to MSCI.
Due to the fact that MSCI Inc (NYSE:MSCI) has faced declining sentiment from the smart money, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes heading into Q2. It’s worth mentioning that Gabriel Plotkin’s Melvin Capital Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, valued at close to $200.9 million in stock. Brandon Haley’s fund, Holocene Advisors, also cut its stock, about $113.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q2.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MSCI Inc (NYSE:MSCI) but similarly valued. We will take a look at Wipro Limited (NYSE:WIT), DexCom, Inc. (NASDAQ:DXCM), Corteva, Inc. (NYSE:CTVA), Pioneer Natural Resources Company (NYSE:PXD), Tencent Music Entertainment Group (NYSE:TME), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), and Hilton Worldwide Holdings Inc (NYSE:HLT). This group of stocks’ market caps match MSCI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WIT | 13 | 130610 | 2 |
| DXCM | 56 | 1678195 | 4 |
| CTVA | 35 | 1503114 | -3 |
| PXD | 37 | 623143 | -3 |
| TME | 63 | 1771488 | 37 |
| ALXN | 77 | 6915184 | 0 |
| HLT | 47 | 5139343 | -13 |
| Average | 46.9 | 2537297 | 3.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.9 hedge funds with bullish positions and the average amount invested in these stocks was $2537 million. That figure was $739 million in MSCI’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 13 bullish hedge fund positions. MSCI Inc (NYSE:MSCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MSCI is 45.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on MSCI as the stock returned 27% since the end of the first quarter (through 6/25) and outperformed the market by an even larger margin.
Follow Msci Inc. (NYSE:MSCI)
Follow Msci Inc. (NYSE:MSCI)
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Disclosure: None. This article was originally published at Insider Monkey.
