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Should You Buy Mercury General Corporation (MCY)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Mercury General Corporation (NYSE:MCY).

Is Mercury General Corporation (NYSE:MCY) a buy, sell, or hold? Money managers are turning bullish. The number of long hedge fund bets moved up by 9 recently. Our calculations also showed that MCY isn’t among the 30 most popular stocks among hedge funds. MCY was in 18 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with MCY positions at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

Let’s review the fresh hedge fund action encompassing Mercury General Corporation (NYSE:MCY).

What does the smart money think about Mercury General Corporation (NYSE:MCY)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in MCY at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MCY_dec2018

More specifically, Renaissance Technologies was the largest shareholder of Mercury General Corporation (NYSE:MCY), with a stake worth $56.1 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $16.6 million. Citadel Investment Group, Marshall Wace LLP, and Prospector Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in Mercury General Corporation (NYSE:MCY). Marshall Wace LLP had $11.9 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $8.4 million investment in the stock during the quarter. The other funds with brand new MCY positions are Michael Platt and William Reeves’s BlueCrest Capital Mgmt., D. E. Shaw’s D E Shaw, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mercury General Corporation (NYSE:MCY) but similarly valued. These stocks are Outfront Media Inc (NYSE:OUT), The Michaels Companies, Inc. (NASDAQ:MIK), Baozun Inc (NASDAQ:BZUN), and Envestnet Inc (NYSE:ENV). This group of stocks’ market valuations match MCY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OUT 13 136660 -3
MIK 26 212111 -2
BZUN 17 123960 -3
ENV 13 70832 0
Average 17.25 135891 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $141 million in MCY’s case. The Michaels Companies, Inc. (NASDAQ:MIK) is the most popular stock in this table. On the other hand Outfront Media Inc (NYSE:OUT) is the least popular one with only 13 bullish hedge fund positions. Mercury General Corporation (NYSE:MCY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MIK might be a better candidate to consider a long position.

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

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