Between June 25 and October 30 the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Materion Corp (NYSE:MTRN) and see how the stock is affected by the recent hedge fund activity.
Materion Corp (NYSE:MTRN) was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. Materion Corp has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 13 hedge funds in our database with Materion Corp holdings at the end of the previous quarter. At the end of this article we will also compare Materion Corp to other stocks including Quad/Graphics, Inc. (NYSE:QUAD), Great Southern Bancorp, Inc. (NASDAQ:GSBC), and Movado Group, Inc (NYSE:MOV) to get a better sense of its popularity.
According to most shareholders, hedge funds are seen as worthless, old financial vehicles of the past. While there are over 8,000 funds in operation today, our researchers choose to focus on the leaders of this club, approximately 700 funds. It is estimated that this group of investors command bulk of the hedge fund industry’s total capital, and by tracking their finest equity investments, Insider Monkey has found a number of investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, let’s take a gander at the recent action regarding Materion Corp (NYSE:MTRN).
What have hedge funds been doing with Materion Corp (NYSE:MTRN)?
Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a 31% fall from one quarter earlier. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or had already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Materion Corp (NYSE:MTRN). GAMCO Investors has a $24.8 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $2.2 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other peers with similar optimism consist of Chuck Royce’s Royce & Associates, D E Shaw, and Peter Muller’s PDT Partners.
Judging by the fact that Materion Corp (NYSE:MTRN) has experienced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their entire stakes last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dumped the largest investment of all the hedgies tracked by Insider Monkey, worth close to $4 million in stock, and George McCabe’s Portolan Capital Management was right behind this move, as the fund cut about $1.3 million worth of shares. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Materion Corp (NYSE:MTRN). These stocks are Quad/Graphics, Inc. (NYSE:QUAD), Great Southern Bancorp, Inc. (NASDAQ:GSBC), Movado Group, Inc (NYSE:MOV), and Dorian LPG Ltd (NYSE:LPG). All of these stocks’ market caps are similar to Materion Corp’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 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $34 million in Materion Corp’s case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand Great Southern Bancorp, Inc. (NASDAQ:GSBC) is the least popular one with only 4 bullish hedge fund positions. Materion Corp (NYSE:MTRN) is not the least popular stock in this group but hedge fund interest is still below average and falling. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard QUAD might be a better candidate to consider for a long position.