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Hedge Funds Have Never Been This Bullish On Malibu Boats Inc (MBUU)

Reymerlyn Martin

"Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Malibu Boats Inc (NASDAQ:MBUU) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Malibu Boats Inc (NASDAQ:MBUU) a healthy stock for your portfolio? Money managers are becoming more confident. The number of long hedge fund bets moved up by 4 in recent months. Our calculations also showed that MBUU isn't among the 30 most popular stocks among hedge funds.

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Jeffrey Talpins Element Capital

Let's take a look at the fresh hedge fund action encompassing Malibu Boats Inc (NASDAQ:MBUU).

How are hedge funds trading Malibu Boats Inc (NASDAQ:MBUU)?

At Q4's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in MBUU a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

MBUU_may2019

More specifically, Renaissance Technologies was the largest shareholder of Malibu Boats Inc (NASDAQ:MBUU), with a stake worth $37.6 million reported as of the end of December. Trailing Renaissance Technologies was Driehaus Capital, which amassed a stake valued at $16.6 million. Marshall Wace LLP, Two Sigma Advisors, and Columbus Circle Investors were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, some big names were breaking ground themselves. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, created the biggest position in Malibu Boats Inc (NASDAQ:MBUU). Shellback Capital had $3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $0.9 million investment in the stock during the quarter. The other funds with brand new MBUU positions are Minhua Zhang's Weld Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Jeffrey Talpins's Element Capital Management.

Let's check out hedge fund activity in other stocks similar to Malibu Boats Inc (NASDAQ:MBUU). These stocks are AdvanSix Inc. (NYSE:ASIX), Encore Capital Group, Inc. (NASDAQ:ECPG), NorthStar Realty Europe Corp. (NYSE:NRE), and Extreme Networks, Inc (NASDAQ:EXTR). All of these stocks' market caps match MBUU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASIX,19,116083,-4 ECPG,8,37757,0 NRE,13,108420,-2 EXTR,20,71221,1 Average,15,83370,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $93 million in MBUU's case. Extreme Networks, Inc (NASDAQ:EXTR) is the most popular stock in this table. On the other hand Encore Capital Group, Inc. (NASDAQ:ECPG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Malibu Boats Inc (NASDAQ:MBUU) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MBUU, though not to the same extent, as the stock returned 17.7% and outperformed the market as well.

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

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