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Hedge Funds Slowly Cashing Out Of MKS Instruments, Inc. (MKSI)

Asma UL Husna

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of MKS Instruments, Inc. (NASDAQ:MKSI) based on that data.

Is MKS Instruments, Inc. (NASDAQ:MKSI) a bargain? The smart money is reducing their bets on the stock. The number of bullish hedge fund bets were trimmed by 1 lately. Our calculations also showed that MKSI 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). MKSI was in 27 hedge funds' portfolios at the end of March. There were 28 hedge funds in our database with MKSI holdings at the end of the previous quarter. Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_69704" align="aligncenter" width="385"] Andrew Sandler of Sandler Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Keeping this in mind we're going to analyze the recent hedge fund action encompassing MKS Instruments, Inc. (NASDAQ:MKSI).

What does smart money think about MKS Instruments, Inc. (NASDAQ:MKSI)?

Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MKSI over the last 18 quarters. So, let's see 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 MKS Instruments, Inc. (NASDAQ:MKSI), with a stake worth $83.7 million reported as of the end of September. Trailing Royce & Associates was Point72 Asset Management, which amassed a stake valued at $55.5 million. Fisher Asset Management, Value Holdings LP, and Renaissance Technologies 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 Value Holdings LP allocated the biggest weight to MKS Instruments, Inc. (NASDAQ:MKSI), around 12.85% of its 13F portfolio. BeaconLight Capital is also relatively very bullish on the stock, designating 1.64 percent of its 13F equity portfolio to MKSI.

Because MKS Instruments, Inc. (NASDAQ:MKSI) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there is a sect of funds who sold off their entire stakes by the end of the first quarter. Interestingly, Jerry Kochanski's Shelter Haven Capital Management cut the biggest position of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $36.8 million in stock. Doug Gordon, Jon Hilsabeck and Don Jabro's fund, Shellback Capital, also cut its stock, about $10.7 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as MKS Instruments, Inc. (NASDAQ:MKSI) but similarly valued. We will take a look at The Boston Beer Company Inc (NYSE:SAM), Berry Global Group Inc (NYSE:BERY), PLDT Inc. (NYSE:PHI), and IDACORP Inc (NYSE:IDA). All of these stocks' market caps match MKSI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAM,24,557916,-2 BERY,34,1206553,-13 PHI,7,74090,0 IDA,24,282100,0 Average,22.25,530165,-3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $296 million in MKSI's case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 7 bullish hedge fund positions. MKS Instruments, Inc. (NASDAQ:MKSI) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on MKSI as the stock returned 29.9% in Q2 (through the end of May) 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.

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