The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Meritor Inc (NYSE:MTOR).
Is MTOR a good stock to buy now? Meritor Inc (NYSE:MTOR) investors should pay attention to a decrease in support from the world’s most elite money managers of late. Meritor Inc (NYSE:MTOR) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. Our calculations also showed that MTOR 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).
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.
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. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Meritor Inc (NYSE:MTOR).
Do Hedge Funds Think MTOR Is A Good Stock To Buy Now?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in MTOR a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Glenview Capital held the most valuable stake in Meritor Inc (NYSE:MTOR), which was worth $81.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $23.3 million worth of shares. GMT Capital, Royce & Associates, and Intrinsic Edge 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 Glenview Capital allocated the biggest weight to Meritor Inc (NYSE:MTOR), around 2.54% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, setting aside 1.65 percent of its 13F equity portfolio to MTOR.
Since Meritor Inc (NYSE:MTOR) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds who sold off their full holdings heading into Q4. Interestingly, Tom Sandell’s Sandell Asset Management said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, comprising about $3 million in stock, and Mika Toikka’s AlphaCrest Capital Management was right behind this move, as the fund sold off about $0.8 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Meritor Inc (NYSE:MTOR) but similarly valued. These stocks are Heartland Express, Inc. (NASDAQ:HTLD), Fulton Financial Corp (NASDAQ:FULT), NMI Holdings Inc (NASDAQ:NMIH), Simulations Plus, Inc. (NASDAQ:SLP), Azul S.A. (NYSE:AZUL), SkyWest, Inc. (NASDAQ:SKYW), and Zealand Pharma A/S (NASDAQ:ZEAL). All of these stocks’ market caps resemble MTOR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $192 million in MTOR’s case. NMI Holdings Inc (NASDAQ:NMIH) is the most popular stock in this table. On the other hand Zealand Pharma A/S (NASDAQ:ZEAL) is the least popular one with only 3 bullish hedge fund positions. Meritor Inc (NYSE:MTOR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTOR is 65.3. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on MTOR as the stock returned 30.5% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.