Materion Corp (MTRN): Are Hedge Funds Right About This Stock?

Is Materion Corp (NYSE:MTRN) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Is Materion Corp (NYSE:MTRN) a buy here? Hedge funds are in a bearish mood. The number of bullish hedge fund bets dropped by 2 recently. Our calculations also showed that mtrn isn’t among the 30 most popular stocks among hedge funds. MTRN was in 13 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with MTRN holdings at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mario Gabelli

Let’s take a look at the recent hedge fund action surrounding Materion Corp (NYSE:MTRN).

How have hedgies been trading Materion Corp (NYSE:MTRN)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in MTRN heading into this year. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with MTRN Positions

More specifically, GAMCO Investors was the largest shareholder of Materion Corp (NYSE:MTRN), with a stake worth $37.2 million reported as of the end of September. Trailing GAMCO Investors was AQR Capital Management, which amassed a stake valued at $15 million. GLG Partners, Citadel Investment Group, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Because Materion Corp (NYSE:MTRN) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising close to $0.4 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Materion Corp (NYSE:MTRN). These stocks are Southside Bancshares, Inc. (NASDAQ:SBSI), TIER REIT, Inc. (NYSE:TIER), Altra Industrial Motion Corp. (NASDAQ:AIMC), and BalckRock Taxable Municipal Bond Trust (NYSE:BBN). This group of stocks’ market caps resemble MTRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBSI 9 67248 -1
TIER 9 82702 2
AIMC 35 568492 21
BBN 1 355 0
Average 13.5 179699 5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $98 million in MTRN’s case. Altra Industrial Motion Corp. (NASDAQ:AIMC) is the most popular stock in this table. On the other hand BalckRock Taxable Municipal Bond Trust (NYSE:BBN) is the least popular one with only 1 bullish hedge fund positions. Materion Corp (NYSE:MTRN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AIMC might be a better candidate to consider a long position.

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