Montauk Renewables, Inc. (MNTK): Are Hedge Funds Right About This Stock?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Montauk Renewables, Inc. (NASDAQ:MNTK).

Is Montauk Renewables, Inc. (NASDAQ:MNTK) an attractive investment now? Money managers were taking an optimistic view. The number of long hedge fund positions improved by 5 lately. Montauk Renewables, Inc. (NASDAQ:MNTK) was in 5 hedge funds’ portfolios at the end of March. Our calculations also showed that MNTK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to check out the recent hedge fund action encompassing Montauk Renewables, Inc. (NASDAQ:MNTK).

Do Hedge Funds Think MNTK Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5 from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MNTK over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arosa Capital Management was the largest shareholder of Montauk Renewables, Inc. (NASDAQ:MNTK), with a stake worth $2.7 million reported as of the end of March. Trailing Arosa Capital Management was ExodusPoint Capital, which amassed a stake valued at $1.6 million. Royce & Associates, Manatuck Hill Partners, and Millennium Management 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 Arosa Capital Management allocated the biggest weight to Montauk Renewables, Inc. (NASDAQ:MNTK), around 0.5% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, designating 0.24 percent of its 13F equity portfolio to MNTK.

Consequently, key money managers have been driving this bullishness. Arosa Capital Management, managed by Till Bechtolsheimer, initiated the biggest position in Montauk Renewables, Inc. (NASDAQ:MNTK). Arosa Capital Management had $2.7 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $1.6 million investment in the stock during the quarter. The other funds with brand new MNTK positions are Chuck Royce’s Royce & Associates, Mark Broach’s Manatuck Hill Partners, and Israel Englander’s Millennium Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Montauk Renewables, Inc. (NASDAQ:MNTK) but similarly valued. We will take a look at New York Mortgage Trust, Inc. (NASDAQ:NYMT), Eagle Bancorp, Inc. (NASDAQ:EGBN), AssetMark Financial Holdings, Inc. (NYSE:AMK), PRA Group, Inc. (NASDAQ:PRAA), Domo Inc. (NASDAQ:DOMO), WestAmerica Bancorp. (NASDAQ:WABC), and Huaneng Power International Inc (NYSE:HNP). All of these stocks’ market caps are similar to MNTK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $6 million in MNTK’s case. Domo Inc. (NASDAQ:DOMO) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 4 bullish hedge fund positions. Montauk Renewables, Inc. (NASDAQ:MNTK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MNTK is 13.5. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately MNTK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MNTK investors were disappointed as the stock returned -28.8% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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