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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards MDU Resources Group Inc (NYSE:MDU).
MDU Resources Group Inc (NYSE:MDU) was in 21 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. MDU has seen an increase in hedge fund sentiment of late. There were 20 hedge funds in our database with MDU positions at the end of the fourth quarter. Our calculations also showed that MDU isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a look at the new hedge fund action surrounding MDU Resources Group Inc (NYSE:MDU).
Do Hedge Funds Think MDU Is A Good Stock To Buy Now?
At the end of March, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MDU over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Cliff Asness's AQR Capital Management has the most valuable position in MDU Resources Group Inc (NYSE:MDU), worth close to $51.9 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Ancora Advisors, managed by Frederick DiSanto, which holds a $25.6 million position; 0.7% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism contain Noam Gottesman's GLG Partners, Phill Gross and Robert Atchinson's Adage Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to MDU Resources Group Inc (NYSE:MDU), around 2.1% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to MDU.
Now, key hedge funds have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most valuable position in MDU Resources Group Inc (NYSE:MDU). Adage Capital Management had $19 million invested in the company at the end of the quarter. Matthew Davis's Coann Capital also initiated a $2.5 million position during the quarter. The other funds with brand new MDU positions are Matthew Hulsizer's PEAK6 Capital Management, Minhua Zhang's Weld Capital Management, and Peter Muller's PDT Partners.
Let's also examine hedge fund activity in other stocks similar to MDU Resources Group Inc (NYSE:MDU). These stocks are WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Affiliated Managers Group, Inc. (NYSE:AMG), Dada Nexus Limited (NASDAQ:DADA), Landstar System, Inc. (NASDAQ:LSTR), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Elbit Systems Ltd. (NASDAQ:ESLT), and Pan American Silver Corp. (NASDAQ:PAAS). This group of stocks' market values resemble MDU's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSC,47,1271017,12 AMG,26,725024,-1 DADA,21,157587,-4 LSTR,15,166365,-3 IONS,23,541031,-5 ESLT,3,50211,-2 PAAS,27,352324,0 Average,23.1,466223,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $466 million. That figure was $163 million in MDU's case. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. MDU Resources Group Inc (NYSE:MDU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MDU is 47.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately MDU wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MDU investors were disappointed as the stock returned -0.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.