Do Hedge Funds Love MGIC Investment Corporation (MTG)?
With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was MGIC Investment Corporation (NYSE:MTG).
Is MGIC Investment Corporation (NYSE:MTG) a healthy stock for your portfolio? Money managers were betting on the stock. The number of bullish hedge fund positions rose by 1 in recent months. MGIC Investment Corporation (NYSE:MTG) was in 28 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that MTG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 27 hedge funds in our database with MTG positions at the end of the fourth quarter.
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.
Howard Marks of Oaktree Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 let's review the new hedge fund action surrounding MGIC Investment Corporation (NYSE:MTG).
Do Hedge Funds Think MTG Is A Good Stock To Buy Now?
At first quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MTG 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.
Among these funds, King Street Capital held the most valuable stake in MGIC Investment Corporation (NYSE:MTG), which was worth $63.8 million at the end of the fourth quarter. On the second spot was Redwood Capital Management which amassed $44.8 million worth of shares. Oaktree Capital Management, Rubric Capital Management, and Royce & Associates 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 King Street Capital allocated the biggest weight to MGIC Investment Corporation (NYSE:MTG), around 4.77% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to MTG.
As one would reasonably expect, key money managers were breaking ground themselves. Rubric Capital Management, managed by David Rosen, assembled the most valuable position in MGIC Investment Corporation (NYSE:MTG). Rubric Capital Management had $21.1 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also made a $15.3 million investment in the stock during the quarter. The following funds were also among the new MTG investors: Mike Vranos's Ellington, Dmitry Balyasny's Balyasny Asset Management, and Daniel Johnson's Gillson Capital.
Let's now take a look at hedge fund activity in other stocks similar to MGIC Investment Corporation (NYSE:MTG). We will take a look at Hexcel Corporation (NYSE:HXL), UFP Industries, Inc. (NASDAQ:UFPI), Perspecta Inc. (NYSE:PRSP), Hamilton Lane Incorporated (NASDAQ:HLNE), FireEye Inc (NASDAQ:FEYE), Altair Engineering Inc. (NASDAQ:ALTR), and New Residential Investment Corp (NYSE:NRZ). This group of stocks' market values match MTG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HXL,18,98420,-7 UFPI,16,171550,-3 PRSP,40,957808,3 HLNE,16,78897,2 FEYE,25,181632,-6 ALTR,18,581401,2 NRZ,15,84760,-7 Average,21.1,307781,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $308 million. That figure was $269 million in MTG's case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand New Residential Investment Corp (NYSE:NRZ) is the least popular one with only 15 bullish hedge fund positions. MGIC Investment Corporation (NYSE:MTG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTG is 49.9. 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 positive signal but 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately MTG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MTG were disappointed as the stock returned -1% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
