MRC Global Inc (MRC): Hedge Funds Cashed Out Right Before Poor Returns

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is MRC Global Inc (NYSE:MRC) a bargain? Prominent investors are selling. The number of long hedge fund bets dropped by 3 lately. Our calculations also showed that MRC isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most traders, hedge funds are seen as worthless, outdated financial tools of the past. While there are over 8000 funds trading at present, We look at the leaders of this club, approximately 750 funds. These money managers oversee bulk of the hedge fund industry’s total asset base, and by paying attention to their top picks, Insider Monkey has unearthed several investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the latest hedge fund action regarding MRC Global Inc (NYSE:MRC).

Hedge fund activity in MRC Global Inc (NYSE:MRC)

At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in MRC over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Steven Cohen, Point72 Asset Management

The largest stake in MRC Global Inc (NYSE:MRC) was held by Luminus Management, which reported holding $42.7 million worth of stock at the end of March. It was followed by D E Shaw with a $26.6 million position. Other investors bullish on the company included Impax Asset Management, Balyasny Asset Management, and GLG Partners.

Due to the fact that MRC Global Inc (NYSE:MRC) has witnessed falling interest from the smart money, logic holds that there was a specific group of funds that elected to cut their entire stakes in the second quarter. At the top of the heap, Renaissance Technologies dropped the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $4.8 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund dropped about $0.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MRC Global Inc (NYSE:MRC) but similarly valued. These stocks are Inc. (NYSE:CARS), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), The Liberty Braves Group (NASDAQ:BATRK), and The Liberty Braves Group (NASDAQ:BATRA). This group of stocks’ market caps match MRC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CARS 29 323559 2
RARX 18 367537 -2
BATRK 23 332871 -5
BATRA 9 68220 -2
Average 19.75 273047 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $106 million in MRC’s case. Inc. (NYSE:CARS) is the most popular stock in this table. On the other hand The Liberty Braves Group (NASDAQ:BATRA) is the least popular one with only 9 bullish hedge fund positions. MRC Global Inc (NYSE:MRC) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MRC investors were disappointed as the stock returned -29.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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