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Matthews International Corp (MATW): Are Hedge Funds Right About This Stock?

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Matthews International Corp (NASDAQ:MATW) in this article.

Matthews International Corp (NASDAQ:MATW) investors should be aware of an increase in hedge fund sentiment lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Inc (NASDAQ:SOHU), Celestica Inc. (USA) (NYSE:CLS), and Old National Bancorp (NYSE:ONB) to gather more data points.

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In the eyes of most investors, hedge funds are perceived as underperforming, old financial tools of years past. While there are more than 8000 funds in operation at present, We choose to focus on the moguls of this club, about 700 funds. These investment experts control bulk of the hedge fund industry’s total asset base, and by following their best stock picks, Insider Monkey has deciphered a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the latest action surrounding Matthews International Corp (NASDAQ:MATW).

What does the smart money think about Matthews International Corp (NASDAQ:MATW)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 44% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Matthews International Corp (NASDAQ:MATW). Pzena Investment Management has a $23.3 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Lee Munder Capital Group, led by Lee Munder, holding a $16.9 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism contain David Dreman’s Dreman Value Management and Jim Simons’ Renaissance Technologies.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, assembled the most outsized position in Matthews International Corp (NASDAQ:MATW). Gotham Asset Management had $7.6 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.4 million position during the quarter. The only other fund with a brand new MATW position is D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Matthews International Corp (NASDAQ:MATW) but similarly valued. We will take a look at Inc (NASDAQ:SOHU), Celestica Inc. (USA) (NYSE:CLS), Old National Bancorp (NYSE:ONB), and KapStone Paper and Packaging Corp. (NYSE:KS). All of these stocks’ market caps match MATW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SOHU 17 436859 -6
CLS 12 16772 -5
ONB 8 22015 0
KS 24 157560 0

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $158 million, while in MATW’s case that figure amounts to $73 million. KapStone Paper and Packaging Corp. (NYSE:KS) is the most popular stock in this table. On the other hand, Old National Bancorp (NYSE:ONB) is the least popular one with only 8 bullish hedge fund positions. Matthews International Corp (NASDAQ:MATW) 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, such as KS, in this particular case.

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