Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at The Marcus Corporation (NYSE:MCS) from the perspective of those elite funds.
Is The Marcus Corporation (NYSE:MCS) a marvelous investment now? Money managers are in a bearish mood. The number of long hedge fund bets went down by 2 lately. Our calculations also showed that MCS 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 former hedge manager, Dr. Steve Sjuggerud, 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 check out the new hedge fund action encompassing The Marcus Corporation (NYSE:MCS).
What have hedge funds been doing with The Marcus Corporation (NYSE:MCS)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MCS over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of The Marcus Corporation (NYSE:MCS), with a stake worth $28.9 million reported as of the end of March. Trailing GAMCO Investors was GLG Partners, which amassed a stake valued at $8.9 million. Arrowstreet Capital, Millennium Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that The Marcus Corporation (NYSE:MCS) has experienced declining sentiment from hedge fund managers, we can see that there were a few hedge funds that slashed their entire stakes in the second quarter. Intriguingly, Jeffrey Talpins's Element Capital Management dumped the biggest investment of the 750 funds followed by Insider Monkey, comprising an estimated $5.2 million in stock. Joel Greenblatt's fund, Gotham Asset Management, also dropped its stock, about $2.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds in the second quarter.
Let's check out hedge fund activity in other stocks similar to The Marcus Corporation (NYSE:MCS). These stocks are NextPoint Residential Trust Inc (NYSE:NXRT), Schweitzer-Mauduit International, Inc. (NYSE:SWM), Milacron Holdings Corp (NYSE:MCRN), and SecureWorks Corp. (NASDAQ:SCWX). This group of stocks' market values are closest to MCS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXRT,10,182442,0 SWM,10,24291,0 MCRN,13,60802,-11 SCWX,9,19866,-3 Average,10.5,71850,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $64 million in MCS's case. Milacron Holdings Corp (NYSE:MCRN) is the most popular stock in this table. On the other hand SecureWorks Corp. (NASDAQ:SCWX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks The Marcus Corporation (NYSE:MCS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MCS as the stock returned 12.8% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.