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Were Hedge Funds Right About Matthews International (MATW)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Matthews International Corp (NASDAQ:MATW)? The smart money sentiment can provide an answer to this question.

Matthews International Corp (NASDAQ:MATW) investors should be aware of a decrease in enthusiasm from smart money in recent months. MATW was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 10 hedge funds in our database with MATW positions at the end of the previous quarter. Our calculations also showed that MATW 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).

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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. Keeping this in mind we’re going to go over the fresh hedge fund action surrounding Matthews International Corp (NASDAQ:MATW).

What does smart money think about Matthews International Corp (NASDAQ:MATW)?

Heading into the first quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the third quarter of 2019. On the other hand, there were a total of 12 hedge funds with a bullish position in MATW a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is MATW A Good Stock To Buy?

Among these funds, GAMCO Investors held the most valuable stake in Matthews International Corp (NASDAQ:MATW), which was worth $16 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $8.7 million worth of shares. Arrowstreet Capital, Rutabaga Capital Management, and Winton Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to Matthews International Corp (NASDAQ:MATW), around 2.71% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to MATW.

Because Matthews International Corp (NASDAQ:MATW) has witnessed declining sentiment from the smart money, we can see that there lies a certain “tier” of money managers that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Renaissance Technologies dropped the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $1.3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Matthews International Corp (NASDAQ:MATW). These stocks are Talend S.A. (NASDAQ:TLND), H&E Equipment Services, Inc. (NASDAQ:HEES), Karyopharm Therapeutics Inc (NASDAQ:KPTI), and Standard Motor Products, Inc. (NYSE:SMP). This group of stocks’ market values resemble MATW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TLND 24 438381 -5
HEES 15 44253 1
KPTI 24 520671 10
SMP 10 104835 -4
Average 18.25 277035 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $44 million in MATW’s case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand Standard Motor Products, Inc. (NYSE:SMP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Matthews International Corp (NASDAQ:MATW) is even less popular than SMP. Hedge funds dodged a bullet by taking a bearish stance towards MATW. Our calculations showed that the top 10 most popular hedge fund stocks 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. Unfortunately MATW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); MATW investors were disappointed as the stock returned -38.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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.

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