Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of MGP Ingredients Inc (NASDAQ:MGPI) based on that data and determine whether they were really smart about the stock.
MGP Ingredients Inc (NASDAQ:MGPI) has experienced a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that MGPI 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_30668" align="aligncenter" width="400"] Richard Chilton of Chilton Investment Company[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to analyze the fresh hedge fund action regarding MGP Ingredients Inc (NASDAQ:MGPI).
What does smart money think about MGP Ingredients Inc (NASDAQ:MGPI)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MGPI 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.
Among these funds, Royce & Associates held the most valuable stake in MGP Ingredients Inc (NASDAQ:MGPI), which was worth $3.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.8 million worth of shares. Winton Capital Management, Citadel Investment Group, and Millennium Management 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 AlphaOne Capital Partners allocated the biggest weight to MGP Ingredients Inc (NASDAQ:MGPI), around 0.65% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to MGPI.
Since MGP Ingredients Inc (NASDAQ:MGPI) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few fund managers who sold off their full holdings in the first quarter. Intriguingly, Amy Minella's Cardinal Capital sold off the largest position of the "upper crust" of funds followed by Insider Monkey, worth about $11.2 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dumped its stock, about $4.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds in the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as MGP Ingredients Inc (NASDAQ:MGPI) but similarly valued. We will take a look at The Shyft Group, Inc. (NASDAQ:SPAR), Heritage Commerce Corp. (NASDAQ:HTBK), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), and Qudian Inc. (NYSE:QD). All of these stocks' market caps are closest to MGPI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPAR,17,57823,-1 HTBK,9,15364,-4 AMEH,4,2310,0 QD,10,15458,-4 Average,10,22739,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $11 million in MGPI's case. The Shyft Group, Inc. (NASDAQ:SPAR) is the most popular stock in this table. On the other hand Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is the least popular one with only 4 bullish hedge fund positions. MGP Ingredients Inc (NASDAQ:MGPI) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on MGPI as the stock returned 37% in Q2 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.