Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Micro Focus Intl PLC (NYSE:MFGP).
Is Micro Focus Intl PLC (NYSE:MFGP) undervalued? The best stock pickers are betting on the stock on the margin. The number of long hedge fund positions rose by 2 lately. However, this doesn't mean that they are really bullish about the stock. Our calculations also showed that MFGP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the key hedge fund action surrounding Micro Focus Intl PLC (NYSE:MFGP).
What have hedge funds been doing with Micro Focus Intl PLC (NYSE:MFGP)?
At Q2's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the first quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in MFGP a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Micro Focus Intl PLC (NYSE:MFGP), which was worth $40 million at the end of the second quarter. On the second spot was Prescott Group Capital Management which amassed $3 million worth of shares. Moreover, PEAK6 Capital Management, Renaissance Technologies, and Citadel Investment Group were also bullish on Micro Focus Intl PLC (NYSE:MFGP), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Renaissance Technologies, initiated the biggest position in Micro Focus Intl PLC (NYSE:MFGP). Renaissance Technologies had $0.8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.4 million position during the quarter.
Let's now take a look at hedge fund activity in other stocks similar to Micro Focus Intl PLC (NYSE:MFGP). These stocks are VICI Properties Inc. (NYSE:VICI), Qiagen NV (NYSE:QGEN), MGM Growth Properties LLC (NYSE:MGP), and Packaging Corporation Of America (NYSE:PKG). All of these stocks' market caps match MFGP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VICI,59,2841028,22 QGEN,25,303029,2 MGP,14,291026,-3 PKG,21,237295,-5 Average,29.75,918095,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $918 million. That figure was $45 million in MFGP's case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand MGM Growth Properties LLC (NYSE:MGP) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Micro Focus Intl PLC (NYSE:MFGP) is even less popular than MGP. Hedge funds dodged a bullet by taking a bearish stance towards MFGP. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MFGP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MFGP investors were disappointed as the stock returned -43.6% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.