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Mettler-Toledo (MTD): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Mettler-Toledo International Inc. (NYSE:MTD) and determine whether the smart money was really smart about this stock.

Is Mettler-Toledo International Inc. (NYSE:MTD) undervalued? Investors who are in the know were getting less optimistic. The number of bullish hedge fund positions fell by 4 in recent months. Mettler-Toledo International Inc. (NYSE:MTD) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. Our calculations also showed that MTD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with MTD holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 56 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to view the recent hedge fund action regarding Mettler-Toledo International Inc. (NYSE:MTD).

What does smart money think about Mettler-Toledo International Inc. (NYSE:MTD)?

At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the first quarter of 2020. By comparison, 20 hedge funds held shares or bullish call options in MTD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mettler-Toledo International Inc. (NYSE:MTD) was held by Impax Asset Management, which reported holding $131.6 million worth of stock at the end of September. It was followed by Chilton Investment Company with a $97.2 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Chilton Investment Company allocated the biggest weight to Mettler-Toledo International Inc. (NYSE:MTD), around 3.21% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, dishing out 1.99 percent of its 13F equity portfolio to MTD.

Seeing as Mettler-Toledo International Inc. (NYSE:MTD) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that decided to sell off their positions entirely by the end of the second quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest position of the 750 funds monitored by Insider Monkey, comprising about $6.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $5 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mettler-Toledo International Inc. (NYSE:MTD) but similarly valued. We will take a look at Carrier Global Corporation (NYSE:CARR), Lennar Corporation (NYSE:LEN), Energy Transfer L.P. (NYSE:ET), Church & Dwight Co., Inc. (NYSE:CHD), MarketAxess Holdings Inc. (NASDAQ:MKTX), Keysight Technologies Inc (NYSE:KEYS), and Wipro Limited (NYSE:WIT). All of these stocks’ market caps are similar to MTD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CARR 44 1524605 41
LEN 55 1692845 -2
ET 31 552361 -2
CHD 33 508177 -3
MKTX 33 918191 6
KEYS 47 564484 7
WIT 7 59120 0
Average 35.7 831398 6.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $831 million. That figure was $584 million in MTD’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 7 bullish hedge fund positions. Mettler-Toledo International Inc. (NYSE:MTD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MTD is 48. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on MTD as the stock returned 21% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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