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Did Hedge Funds Make The Right Call On MasterCraft Boat Holdings, Inc. (MCFT) ?

Debasis Saha

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) and determine whether hedge funds skillfully traded this stock.

MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that MCFT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let's review the new hedge fund action surrounding MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT).

How have hedgies been trading MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT)?

At Q1's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in MCFT a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is MCFT A Good Stock To Buy?
Is MCFT A Good Stock To Buy?

More specifically, Divisar Capital was the largest shareholder of MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), with a stake worth $13.5 million reported as of the end of September. Trailing Divisar Capital was Fairfax Financial Holdings, which amassed a stake valued at $11.6 million. Royce & Associates, ACK Asset Management, and Renaissance Technologies 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 Divisar Capital allocated the biggest weight to MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), around 5.26% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, designating 2.1 percent of its 13F equity portfolio to MCFT.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Magnolia Capital Fund, managed by Adam Peterson, assembled the most valuable position in MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT). Magnolia Capital Fund had $1.1 million invested in the company at the end of the quarter. Jeffrey Moskowitz's Harvey Partners also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Greg Eisner's Engineers Gate Manager and Minhua Zhang's Weld Capital Management.

Let's check out hedge fund activity in other stocks similar to MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT). We will take a look at Tortoise Energy Infrastructure Corporation (NYSE:TYG), Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI), Taiwan Liposome Company, Ltd. (NASDAQ:TLC), and Bluerock Residential Growth REIT Inc (NYSE:BRG). This group of stocks' market caps are similar to MCFT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TYG,2,533,1 RMBI,5,3065,1 TLC,1,308,-1 BRG,10,12084,-2 Average,4.5,3998,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $55 million in MCFT's case. Bluerock Residential Growth REIT Inc (NYSE:BRG) is the most popular stock in this table. On the other hand Taiwan Liposome Company, Ltd. (NASDAQ:TLC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on MCFT as the stock returned 209.9% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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