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Are Hedge Funds Done Selling Motorcar Parts of America, Inc. (MPAA)?

Debasis Saha

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Motorcar Parts of America, Inc. (NASDAQ:MPAA) based on that data.

Motorcar Parts of America, Inc. (NASDAQ:MPAA) has seen an increase in hedge fund sentiment of late. MPAA was in 6 hedge funds' portfolios at the end of March. There were 5 hedge funds in our database with MPAA holdings at the end of the previous quarter. Our calculations also showed that MPAA 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.

[caption id="attachment_338852" align="aligncenter" width="400"] Richard S. Pzena of Pzena Investment Management[/caption]

Richard Pzena - Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a glance at the new hedge fund action surrounding Motorcar Parts of America, Inc. (NASDAQ:MPAA).

What have hedge funds been doing with Motorcar Parts of America, Inc. (NASDAQ:MPAA)?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MPAA over the last 18 quarters. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is MPAA A Good Stock To Buy?

More specifically, Pzena Investment Management was the largest shareholder of Motorcar Parts of America, Inc. (NASDAQ:MPAA), with a stake worth $22.9 million reported as of the end of September. Trailing Pzena Investment Management was Private Capital Management, which amassed a stake valued at $16.4 million. Rutabaga Capital Management, Royce & Associates, and D E Shaw 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 Private Capital Management allocated the biggest weight to Motorcar Parts of America, Inc. (NASDAQ:MPAA), around 5.14% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, earmarking 2.63 percent of its 13F equity portfolio to MPAA.

Consequently, key hedge funds have been driving this bullishness. Ellington, managed by Mike Vranos, assembled the most outsized position in Motorcar Parts of America, Inc. (NASDAQ:MPAA). Ellington had $0.2 million invested in the company at the end of the quarter.

Let's check out hedge fund activity in other stocks similar to Motorcar Parts of America, Inc. (NASDAQ:MPAA). We will take a look at Majesco (NYSE:MJCO), Geron Corporation (NASDAQ:GERN), Investors Title Company (NASDAQ:ITIC), and SmartFinancial, Inc. (NASDAQ:SMBK). This group of stocks' market values match MPAA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MJCO,1,63,0 GERN,3,1186,-1 ITIC,5,31169,1 SMBK,7,19483,-1 Average,4,12975,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $45 million in MPAA's case. SmartFinancial, Inc. (NASDAQ:SMBK) is the most popular stock in this table. On the other hand Majesco (NYSE:MJCO) is the least popular one with only 1 bullish hedge fund positions. Motorcar Parts of America, Inc. (NASDAQ:MPAA) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on MPAA as the stock returned 32.4% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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