We can judge whether Mohawk Industries, Inc. (NYSE:MHK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Mohawk Industries, Inc. (NYSE:MHK) the right investment to pursue these days? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund positions decreased by 1 lately. Our calculations also showed that MHK isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to 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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the key hedge fund action encompassing Mohawk Industries, Inc. (NYSE:MHK).
How have hedgies been trading Mohawk Industries, Inc. (NYSE:MHK)?
At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MHK over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the number one position in Mohawk Industries, Inc. (NYSE:MHK). Eagle Capital Management has a $678.7 million position in the stock, comprising 2.4% of its 13F portfolio. On Eagle Capital Management's heels is Richard S. Pzena of Pzena Investment Management, with a $291.8 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other peers that are bullish include Robert Rodriguez and Steven Romick's First Pacific Advisors LLC, John Overdeck and David Siegel's Two Sigma Advisors and Bob Peck and Andy Raab's FPR Partners.
Due to the fact that Mohawk Industries, Inc. (NYSE:MHK) has faced falling interest from the smart money, it's safe to say that there was a specific group of fund managers who sold off their full holdings heading into Q3. At the top of the heap, Jonathan Auerbach's Hound Partners dropped the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising about $30.9 million in stock. Ray Dalio's fund, Bridgewater Associates, also dumped its stock, about $13.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Mohawk Industries, Inc. (NYSE:MHK) but similarly valued. These stocks are PerkinElmer, Inc. (NYSE:PKI), Vistra Energy Corp. (NYSE:VST), Comerica Incorporated (NYSE:CMA), and NiSource Inc. (NYSE:NI). This group of stocks' market caps resemble MHK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PKI,24,971959,-1 VST,39,2308414,-9 CMA,32,509157,-4 NI,22,785694,4 Average,29.25,1143806,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1144 million. That figure was $1991 million in MHK's case. Vistra Energy Corp. (NYSE:VST) is the most popular stock in this table. On the other hand NiSource Inc. (NYSE:NI) is the least popular one with only 22 bullish hedge fund positions. Mohawk Industries, Inc. (NYSE:MHK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MHK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MHK were disappointed as the stock returned -15.9% during the third quarter and underperformed 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.