While the market is being driven by short-term sentiment influenced by the uncertainty regarding the future of the interest rate environment in the U.S, the low commodity prices, and the economic turmoil in China, many smart money investors are nonetheless keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding MGIC Investment Corp. (NYSE:MTG).
MGIC Investment Corp. (NYSE:MTG) shareholders have witnessed a decrease in enthusiasm from smart money recently. MTG was in 47 hedge funds’ portfolios at the end of the third quarter of 2015. There were 49 hedge funds in our database with MTG holdings at the end of the previous quarter. At the end of this article we will also compare MTG to other stocks including LifePoint Hospitals, Inc. (NASDAQ:LPNT), Genesee & Wyoming Inc (NYSE:GWR), and SLM Corp (NASDAQ:SLM) to get a better sense of its popularity.
In the eyes of most traders, hedge funds are assumed to be unimportant, old investment tools of yesteryear. While there are over 8,000 funds with their doors open at present, experts at hedge fund tracking site Insider Monkey look at the masters of this club, about 700 funds. These hedge fund managers watch over the majority of all hedge funds’ total asset base, and by watching their first-class stock picks, Insider Monkey has deciphered a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in its back tests.
With all of this in mind, let’s take a glance at the recent action regarding MGIC Investment Corp. (NYSE:MTG).
How are hedge funds trading MGIC Investment Corp. (NYSE:MTG)?
At Q3’s end, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a dip of 4% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially.
According to Insider Monkey’s hedge fund database, Paulson & Co, managed by John Paulson, holds the largest position in MGIC Investment Corp. (NYSE:MTG). Paulson & Co has a $214.5 million position in the stock, comprising 1.1% of its 13F portfolio. Sitting in second is Senator Investment Group, led by Doug Silverman and Alexander Klabin, holding a $121.7 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other hedge funds that are bullish include Rob Citrone’s Discovery Capital Management, and John Griffin’s Blue Ridge Capital.
Due to the fact that MGIC Investment Corp. (NYSE:MTG) has witnessed a declination in interest from hedge fund managers, logic holds that there is a sect of money managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Stephen Mandel’s Lone Pine Capital cut the largest stake of the 700 funds watched by Insider Monkey, comprising close to $141.1 million in stock, while John Burbank of Passport Capital was right behind this move, as the fund dumped about $15.6 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest dropped by two funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to MGIC Investment Corp. (NYSE:MTG). These stocks are LifePoint Hospitals, Inc. (NASDAQ:LPNT), Genesee & Wyoming Inc (NYSE:GWR), SLM Corp (NASDAQ:SLM), and Equity One, Inc. (NYSE:EQY). All of these stocks’ market caps resemble MTG’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $210 million, while in MTG the amount was $1.34 billion. LifePoint Hospitals, Inc. (NASDAQ:LPNT) is the most popular stock in this table. On the other hand Equity One, Inc. (NYSE:EQY) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks MGIC Investment Corp. (NYSE:MTG) is more popular among hedge funds. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio, despite a limited slip in popularity.