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2019 Review: Most Favored Hedge Fund Stocks vs. Macquarie Infrastructure Corporation (MIC)

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Macquarie Infrastructure Corporation (NYSE:MIC) a bargain? The smart money is in a pessimistic mood. The number of bullish hedge fund positions fell by 2 recently. Our calculations also showed that MIC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

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We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now we're going to take a glance at the latest hedge fund action encompassing Macquarie Infrastructure Corporation (NYSE:MIC).

How are hedge funds trading Macquarie Infrastructure Corporation (NYSE:MIC)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MIC over the last 17 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Is MIC A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey,  Renaissance Technologies has the number one position in Macquarie Infrastructure Corporation (NYSE:MIC), worth close to $62.3 million, amounting to 0.1% of its total 13F portfolio. Coming in second is GAMCO Investors, managed by Mario Gabelli, which holds a $39.1 million position; 0.3% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions encompass David Brown's Hawk Ridge Management, Brian Ashford-Russell and Tim Woolley's Polar Capital and Jeffrey Bronchick's Cove Street Capital. In terms of the portfolio weights assigned to each position Hawk Ridge Management allocated the biggest weight to Macquarie Infrastructure Corporation (NYSE:MIC), around 6.32% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, earmarking 2.92 percent of its 13F equity portfolio to MIC.

Judging by the fact that Macquarie Infrastructure Corporation (NYSE:MIC) has experienced falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of money managers that decided to sell off their full holdings in the third quarter. Intriguingly, Israel Englander's Millennium Management sold off the largest stake of the 750 funds tracked by Insider Monkey, worth about $6.4 million in stock. Clint Carlson's fund, Carlson Capital, also cut its stock, about $4.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Macquarie Infrastructure Corporation (NYSE:MIC) but similarly valued. We will take a look at Descartes Systems Group (NASDAQ:DSGX), Axon Enterprise, Inc. (NASDAQ:AAXN), Tegna Inc (NYSE:TGNA), and Terreno Realty Corporation (NYSE:TRNO). This group of stocks' market values match MIC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DSGX,14,126013,3 AAXN,14,209400,-2 TGNA,18,359437,3 TRNO,10,51158,1 Average,14,186502,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $232 million in MIC's case. Tegna Inc (NYSE:TGNA) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Macquarie Infrastructure Corporation (NYSE:MIC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately MIC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MIC were disappointed as the stock returned 29.2% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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