In this article we will take a look at whether hedge funds think Marcus & Millichap Inc (NYSE:MMI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Marcus & Millichap Inc (NYSE:MMI) the right pick for your portfolio? Money managers are becoming less confident. The number of long hedge fund positions retreated by 4 in recent months. Our calculations also showed that MMI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_673876" align="aligncenter" width="400"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the new hedge fund action regarding Marcus & Millichap Inc (NYSE:MMI).
How are hedge funds trading Marcus & Millichap Inc (NYSE:MMI)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in MMI a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Marcus & Millichap Inc (NYSE:MMI), with a stake worth $70.6 million reported as of the end of September. Trailing Royce & Associates was Winton Capital Management, which amassed a stake valued at $6.6 million. Sprott Asset Management, Two Sigma Advisors, and Citadel Investment Group 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 Royce & Associates allocated the biggest weight to Marcus & Millichap Inc (NYSE:MMI), around 0.96% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.55 percent of its 13F equity portfolio to MMI.
Judging by the fact that Marcus & Millichap Inc (NYSE:MMI) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few fund managers who were dropping their entire stakes by the end of the first quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, worth about $0.7 million in stock, and Mika Toikka's AlphaCrest Capital Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Marcus & Millichap Inc (NYSE:MMI) but similarly valued. These stocks are Viper Energy Partners LP (NASDAQ:VNOM), Pretium Resources Inc (NYSE:PVG), Addus Homecare Corporation (NASDAQ:ADUS), and Alamo Group, Inc. (NYSE:ALG). This group of stocks' market caps are closest to MMI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNOM,11,29548,-5 PVG,25,66926,1 ADUS,15,65282,-2 ALG,8,132111,1 Average,14.75,73467,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $83 million in MMI's case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand Alamo Group, Inc. (NYSE:ALG) is the least popular one with only 8 bullish hedge fund positions. Marcus & Millichap Inc (NYSE:MMI) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately MMI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MMI investors were disappointed as the stock returned 9.1% during the second quarter 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.