Is Mistras Group, Inc. (NYSE:MG) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Mistras Group, Inc. (NYSE:MG) a buy here? The best stock pickers are taking a bearish view. The number of bullish hedge fund bets were trimmed by 2 lately. Our calculations also showed that mg isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to go over the recent hedge fund action surrounding Mistras Group, Inc. (NYSE:MG).
How have hedgies been trading Mistras Group, Inc. (NYSE:MG)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MG over the last 15 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Mistras Group, Inc. (NYSE:MG) was held by Rutabaga Capital Management, which reported holding $10.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $6.5 million position. Other investors bullish on the company included D E Shaw, Engine Capital, and Arrowstreet Capital.
Seeing as Mistras Group, Inc. (NYSE:MG) has experienced bearish sentiment from hedge fund managers, it's safe to say that there were a few hedgies that slashed their positions entirely heading into Q3. At the top of the heap, Israel Englander's Millennium Management said goodbye to the largest investment of the 700 funds monitored by Insider Monkey, totaling close to $2 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund cut about $0.4 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Mistras Group, Inc. (NYSE:MG). These stocks are Roadrunner Transportation Systems Inc (NYSE:RRTS), Gogo Inc (NASDAQ:GOGO), CryoPort, Inc. (NASDAQ:CYRX), and Village Super Market, Inc. (NASDAQ:VLGEA). This group of stocks' market values resemble MG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RRTS,7,356885,1 GOGO,12,76961,1 CYRX,7,6423,3 VLGEA,8,49382,0 Average,8.5,122413,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $28 million in MG's case. Gogo Inc (NASDAQ:GOGO) is the most popular stock in this table. On the other hand Roadrunner Transportation Systems Inc (NYSE:RRTS) is the least popular one with only 7 bullish hedge fund positions. Mistras Group, Inc. (NYSE:MG) 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 MG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MG were disappointed as the stock returned 0.1% 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.