We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Manchester United PLC (NYSE:MANU) which has one of the best French soccer players in its squad.
Is Manchester United PLC (NYSE:MANU) a healthy stock for your portfolio? Prominent investors are getting more optimistic. The number of bullish hedge fund positions rose by 1 in recent months. Our calculations also showed that MANU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MANU was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 10 hedge funds in our database with MANU positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's take a glance at the fresh hedge fund action encompassing Manchester United PLC (NYSE:MANU).
What have hedge funds been doing with Manchester United PLC (NYSE:MANU)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MANU over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Manchester United PLC (NYSE:MANU), with a stake worth $11.1 million reported as of the end of September. Trailing Renaissance Technologies was Lansdowne Partners, which amassed a stake valued at $6.1 million. D E Shaw, Alyeska Investment Group, and Potrero Capital Research 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 Potrero Capital Research allocated the biggest weight to Manchester United PLC (NYSE:MANU), around 1.57% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, designating 0.84 percent of its 13F equity portfolio to MANU.
As industrywide interest jumped, some big names were leading the bulls' herd. Intrepid Capital Management, managed by Mark Travis, created the most outsized position in Manchester United PLC (NYSE:MANU). Intrepid Capital Management had $1.6 million invested in the company at the end of the quarter. Tom Sandell's Sandell Asset Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Israel Englander's Millennium Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Manchester United PLC (NYSE:MANU) but similarly valued. These stocks are Methanex Corporation (NASDAQ:MEOH), Emergent Biosolutions Inc (NYSE:EBS), AMN Healthcare Services Inc (NYSE:AMN), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks' market valuations are similar to MANU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MEOH,16,186485,-1 EBS,18,157940,5 AMN,7,65930,-7 COLB,8,100681,1 Average,12.25,127759,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $32 million in MANU's case. Emergent Biosolutions Inc (NYSE:EBS) is the most popular stock in this table. On the other hand AMN Healthcare Services Inc (NYSE:AMN) is the least popular one with only 7 bullish hedge fund positions. Manchester United PLC (NYSE:MANU) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MANU as the stock returned 13.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.