As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Minerals Technologies Inc (NYSE:MTX).
Minerals Technologies Inc (NYSE:MTX) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Innospec Inc. (NASDAQ:IOSP), The Medicines Company (NASDAQ:MDCO), and ExlService Holdings, Inc. (NASDAQ:EXLS) to gather more data points.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We're going to go over the latest hedge fund action encompassing Minerals Technologies Inc (NYSE:MTX).
What have hedge funds been doing with Minerals Technologies Inc (NYSE:MTX)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in MTX a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Minerals Technologies Inc (NYSE:MTX), with a stake worth $90.7 million reported as of the end of March. Trailing Royce & Associates was Daruma Asset Management, which amassed a stake valued at $22.3 million. AQR Capital Management, GAMCO Investors, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Since Minerals Technologies Inc (NYSE:MTX) has witnessed declining sentiment from the smart money, we can see that there is a sect of fund managers who were dropping their entire stakes last quarter. Interestingly, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital dumped the biggest stake of all the hedgies followed by Insider Monkey, worth close to $0.4 million in stock, and Thomas Bailard's Bailard Inc was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Minerals Technologies Inc (NYSE:MTX). These stocks are Innospec Inc. (NASDAQ:IOSP), The Medicines Company (NASDAQ:MDCO), ExlService Holdings, Inc. (NASDAQ:EXLS), and PQ Group Holdings Inc. (NYSE:PQG). All of these stocks' market caps are similar to MTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IOSP,14,61172,0 MDCO,25,582391,5 EXLS,10,42850,-1 PQG,6,56295,2 Average,13.75,185677,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $152 million in MTX's case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 6 bullish hedge fund positions. Minerals Technologies Inc (NYSE:MTX) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately MTX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MTX were disappointed as the stock returned 0.2% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.