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Should You Buy MSCI Inc (MSCI)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on MSCI Inc (NYSE:MSCI).

Is MSCI Inc (NYSE:MSCI) ready to rally soon? The best stock pickers are getting more bullish. The number of bullish hedge fund bets advanced by 6 recently. Our calculations also showed that MSCI isn’t among the 30 most popular stocks among hedge funds. MSCI was in 36 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with MSCI positions at the end of the previous quarter.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.

RENAISSANCE TECHNOLOGIES

We’re going to take a gander at the fresh hedge fund action surrounding MSCI Inc (NYSE:MSCI).

What have hedge funds been doing with MSCI Inc (NYSE:MSCI)?

At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MSCI over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MSCI_dec2018

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the most valuable position in MSCI Inc (NYSE:MSCI). Renaissance Technologies has a $120.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $99.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Paul Marshall and Ian Wace’s Marshall Wace LLP, Ted Kang’s Kylin Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Consequently, specific money managers were leading the bulls’ herd. Hillhouse Capital Management, managed by Lei Zhang, assembled the most valuable position in MSCI Inc (NYSE:MSCI). Hillhouse Capital Management had $12.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are George Zweig, Shane Haas and Ravi Chander’s Signition LP, Mike Vranos’s Ellington, and Ian Simm’s Impax Asset Management.

Let’s check out hedge fund activity in other stocks similar to MSCI Inc (NYSE:MSCI). These stocks are ANSYS, Inc. (NASDAQ:ANSS), Veeva Systems Inc (NYSE:VEEV), Equifax Inc. (NYSE:EFX), and Take-Two Interactive Software, Inc. (NASDAQ:TTWO). This group of stocks’ market valuations match MSCI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANSS 26 587440 1
VEEV 31 558595 2
EFX 35 2075715 0
TTWO 58 2336400 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.39 billion. That figure was $768 million in MSCI’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand ANSYS, Inc. (NASDAQ:ANSS) is the least popular one with only 26 bullish hedge fund positions. MSCI Inc (NYSE:MSCI) 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. In this regard TTWO might be a better candidate to consider a long position.

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

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