Was The Smart Money Right About Mesa Laboratories, Inc. (MLAB)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Mesa Laboratories, Inc. (NASDAQ:MLAB).

Mesa Laboratories, Inc. (NASDAQ:MLAB) was in 10 hedge funds’ portfolios at the end of December. MLAB investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 9 hedge funds in our database with MLAB holdings at the end of the previous quarter. Our calculations also showed that MLAB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the new hedge fund action regarding Mesa Laboratories, Inc. (NASDAQ:MLAB).

How have hedgies been trading Mesa Laboratories, Inc. (NASDAQ:MLAB)?

Heading into the first quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MLAB over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Mesa Laboratories, Inc. (NASDAQ:MLAB) was held by Royce & Associates, which reported holding $66.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $16.4 million position. Other investors bullish on the company included LMR Partners, GLG Partners, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to Mesa Laboratories, Inc. (NASDAQ:MLAB), around 0.65% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.59 percent of its 13F equity portfolio to MLAB.

As one would reasonably expect, specific money managers were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, created the largest position in Mesa Laboratories, Inc. (NASDAQ:MLAB). LMR Partners had $13.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $1.6 million position during the quarter. The following funds were also among the new MLAB investors: Dmitry Balyasny’s Balyasny Asset Management and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks similar to Mesa Laboratories, Inc. (NASDAQ:MLAB). We will take a look at Playa Hotels & Resorts N.V. (NASDAQ:PLYA), iHeartMedia, Inc. (NASDAQ:IHRT), Weis Markets, Inc. (NYSE:WMK), and Abercrombie & Fitch Co. (NYSE:ANF). This group of stocks’ market valuations are closest to MLAB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLYA 18 506471 1
IHRT 31 221245 5
WMK 12 50262 -4
ANF 26 334232 3
Average 21.75 278053 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $110 million in MLAB’s case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand Weis Markets, Inc. (NYSE:WMK) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Mesa Laboratories, Inc. (NASDAQ:MLAB) is even less popular than WMK. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on MLAB, though not to the same extent, as the stock returned -7.4% during the same time period and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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