"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Methanex Corporation (NASDAQ:MEOH) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Methanex Corporation (NASDAQ:MEOH) investors should be aware of a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that MEOH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_256989" align="aligncenter" width="450"] Dmitry Balyasny of Balyasny Asset Managemnet[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to go over the latest hedge fund action surrounding Methanex Corporation (NASDAQ:MEOH).
How are hedge funds trading Methanex Corporation (NASDAQ:MEOH)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MEOH over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Methanex Corporation (NASDAQ:MEOH) was held by Millennium Management, which reported holding $42.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $38.2 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position GRT Capital Partners allocated the biggest weight to Methanex Corporation (NASDAQ:MEOH), around 0.67% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to MEOH.
Since Methanex Corporation (NASDAQ:MEOH) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there was a specific group of fund managers that slashed their positions entirely by the end of the third quarter. It's worth mentioning that Benjamin A. Smith's Laurion Capital Management dropped the largest position of the "upper crust" of funds tracked by Insider Monkey, comprising close to $1.8 million in stock. David Andre and Astro Teller's fund, Cerebellum Capital, also sold off its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Methanex Corporation (NASDAQ:MEOH) but similarly valued. These stocks are Emergent Biosolutions Inc (NYSE:EBS), AMN Healthcare Services Inc (NYSE:AMN), Columbia Banking System Inc (NASDAQ:COLB), and Fulton Financial Corp (NASDAQ:FULT). This group of stocks' market values match MEOH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBS,18,157940,5 AMN,7,65930,-7 COLB,8,100681,1 FULT,15,17782,1 Average,12,85583,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $186 million in MEOH'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. Methanex Corporation (NASDAQ:MEOH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately MEOH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MEOH were disappointed as the stock returned 5.4% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.