The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded MSCI Inc (NYSE:MSCI) and determine whether the smart money was really smart about this stock.
MSCI Inc (NYSE:MSCI) investors should be aware of an increase in activity from the world's largest hedge funds of late. MSCI Inc (NYSE:MSCI) was in 44 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 29 hedge funds in our database with MSCI positions at the end of the first quarter. Our calculations also showed that MSCI 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.
According to most market participants, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are over 8000 funds with their doors open today, Our experts look at the moguls of this group, about 850 funds. These money managers shepherd most of the smart money's total capital, and by keeping track of their first-class equity investments, Insider Monkey has spotted a number of investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Tom Gayner of Markel Gayner Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we're going to take a gander at the fresh hedge fund action regarding MSCI Inc (NYSE:MSCI).
How have hedgies been trading MSCI Inc (NYSE:MSCI)?
Heading into the third quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 52% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MSCI over the last 20 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in MSCI Inc (NYSE:MSCI) was held by SCGE Management, which reported holding $147.5 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $68.8 million position. Other investors bullish on the company included Junto Capital Management, Markel Gayner Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Totem Point Management allocated the biggest weight to MSCI Inc (NYSE:MSCI), around 5.99% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, earmarking 3.94 percent of its 13F equity portfolio to MSCI.
As aggregate interest increased, key money managers were leading the bulls' herd. Junto Capital Management, managed by James Parsons, established the most outsized position in MSCI Inc (NYSE:MSCI). Junto Capital Management had $54.3 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $35.3 million position during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Anand Parekh's Alyeska Investment Group, and Steve Cohen's Point72 Asset Management.
Let's now review hedge fund activity in other stocks similar to MSCI Inc (NYSE:MSCI). These stocks are Marriott International Inc (NYSE:MAR), ResMed Inc. (NYSE:RMD), SYSCO Corporation (NYSE:SYY), Cintas Corporation (NASDAQ:CTAS), WEC Energy Group, Inc. (NYSE:WEC), The Clorox Company (NYSE:CLX), and Verisk Analytics, Inc. (NASDAQ:VRSK). This group of stocks' market caps match MSCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAR,48,2159338,1 RMD,25,224162,-8 SYY,42,2177488,7 CTAS,34,531899,-8 WEC,30,290696,1 CLX,36,1488687,-5 VRSK,36,981827,5 Average,35.9,1122014,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $1122 million. That figure was $730 million in MSCI's case. Marriott International Inc (NYSE:MAR) is the most popular stock in this table. On the other hand ResMed Inc. (NYSE:RMD) is the least popular one with only 25 bullish hedge fund positions. MSCI Inc (NYSE:MSCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MSCI is 81.3. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately MSCI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MSCI were disappointed as the stock returned 12.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.