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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MarineMax, Inc. (NYSE:HZO) at the end of the second quarter and determine whether the smart money was really smart about this stock.
MarineMax, Inc. (NYSE:HZO) was in 21 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. HZO shareholders have witnessed an increase in hedge fund interest in recent months. There were 10 hedge funds in our database with HZO holdings at the end of March. Our calculations also showed that HZO isn't among the 30 most popular stocks among hedge funds (click for Q2 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 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 S&P 500 ETFs by 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 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.
Brad Farber of Atika Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we're going to go over the new hedge fund action encompassing MarineMax, Inc. (NYSE:HZO).
How have hedgies been trading MarineMax, Inc. (NYSE:HZO)?
At Q2's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 110% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards HZO over the last 20 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, Israel Englander's Millennium Management has the largest position in MarineMax, Inc. (NYSE:HZO), worth close to $9 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Intrinsic Edge Capital, managed by Mark Coe, which holds a $7.2 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish consist of Richard Driehaus's Driehaus Capital, Mark Broach's Manatuck Hill Partners and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to MarineMax, Inc. (NYSE:HZO), around 2.36% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 0.66 percent of its 13F equity portfolio to HZO.
As aggregate interest increased, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the largest position in MarineMax, Inc. (NYSE:HZO). Millennium Management had $9 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $7.2 million position during the quarter. The other funds with brand new HZO positions are Richard Driehaus's Driehaus Capital, Mark Broach's Manatuck Hill Partners, and Brad Farber's Atika Capital.
Let's also examine hedge fund activity in other stocks similar to MarineMax, Inc. (NYSE:HZO). We will take a look at Nexgen Energy Ltd. (NYSE:NXE), Owens & Minor, Inc. (NYSE:OMI), GTT Communications Inc (NYSE:GTT), SIGA Technologies Inc. (NASDAQ:SIGA), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), and IMARA Inc. (NASDAQ:IMRA). This group of stocks' market valuations resemble HZO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXE,7,18290,2 OMI,15,69007,-1 GTT,9,136407,-1 SIGA,11,44401,1 SCHN,11,8880,0 CPRX,22,91504,2 IMRA,6,120524,-2 Average,11.6,69859,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $43 million in HZO's case. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is the most popular stock in this table. On the other hand IMARA Inc. (NASDAQ:IMRA) is the least popular one with only 6 bullish hedge fund positions. MarineMax, Inc. (NYSE:HZO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HZO is 86.9. 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. 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on HZO as the stock returned 14.6% during Q3 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.