Were Hedge Funds Right About Warming Up To MSCI Inc (MSCI)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like MSCI Inc (NYSE:MSCI).

Is MSCI Inc (NYSE:MSCI) worth your attention right now? Hedge funds are turning bullish. The number of long hedge fund bets improved by 1 lately. Our calculations also showed that MSCI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are dozens of indicators investors can use to analyze stocks. Some of the best indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can trounce the broader indices by a significant margin (see the details here).

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the latest hedge fund action encompassing MSCI Inc (NYSE:MSCI).

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

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MSCI over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MSCI Positions

The largest stake in MSCI Inc (NYSE:MSCI) was held by Renaissance Technologies, which reported holding $226.8 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $68.1 million position. Other investors bullish on the company included GLG Partners, Fisher Asset Management, and Kylin Management. In terms of the portfolio weights assigned to each position Kylin Management allocated the biggest weight to MSCI Inc (NYSE:MSCI), around 10.62% of its portfolio. Totem Point Management is also relatively very bullish on the stock, earmarking 2.93 percent of its 13F equity portfolio to MSCI.

With a general bullishness amongst the heavyweights, key money managers have jumped into MSCI Inc (NYSE:MSCI) headfirst. Perella Weinberg Partners assembled the biggest position in MSCI Inc (NYSE:MSCI). Perella Weinberg Partners had $2.5 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with brand new MSCI positions are Matthew Hulsizer’s PEAK6 Capital Management, Minhua Zhang’s Weld Capital Management, and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MSCI Inc (NYSE:MSCI) but similarly valued. We will take a look at Hess Corporation (NYSE:HES), Copart, Inc. (NASDAQ:CPRT), IAC/InterActiveCorp (NASDAQ:IAC), and Arista Networks Inc (NYSE:ANET). All of these stocks’ market caps match MSCI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HES 36 921996 1
CPRT 36 580287 6
IAC 51 2111302 4
ANET 20 178704 -8
Average 35.75 948072 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $644 million in MSCI’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 20 bullish hedge fund positions. MSCI Inc (NYSE:MSCI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MSCI as the stock returned 19.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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