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World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Mueller Industries, Inc. (NYSE:MLI) was in 13 hedge funds' portfolios at the end of the first quarter of 2019. MLI has seen an increase in hedge fund sentiment in recent months. There were 10 hedge funds in our database with MLI holdings at the end of the previous quarter. Our calculations also showed that MLI isn't among the 30 most popular stocks among hedge funds.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a gander at the key hedge fund action encompassing Mueller Industries, Inc. (NYSE:MLI).
How have hedgies been trading Mueller Industries, Inc. (NYSE:MLI)?
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MLI over the last 15 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, GAMCO Investors held the most valuable stake in Mueller Industries, Inc. (NYSE:MLI), which was worth $133.1 million at the end of the first quarter. On the second spot was Royce & Associates which amassed $25.2 million worth of shares. Moreover, Fisher Asset Management, D E Shaw, and Arrowstreet Capital were also bullish on Mueller Industries, Inc. (NYSE:MLI), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in Mueller Industries, Inc. (NYSE:MLI). Arrowstreet Capital had $4.6 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $0.9 million position during the quarter. The following funds were also among the new MLI investors: Benjamin A. Smith's Laurion Capital Management and Hoon Kim's Quantinno Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Mueller Industries, Inc. (NYSE:MLI) but similarly valued. We will take a look at Axos Financial, Inc. (NYSE:AX), Summit Materials Inc (NYSE:SUM), SJW Corp. (NYSE:SJW), and Tower Semiconductor Ltd. (NASDAQ:TSEM). This group of stocks' market caps are similar to MLI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AX,13,61258,-2 SUM,22,480411,2 SJW,15,172638,-5 TSEM,12,258420,-4 Average,15.5,243182,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $185 million in MLI's case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Tower Semiconductor Ltd. (NASDAQ:TSEM) is the least popular one with only 12 bullish hedge fund positions. Mueller Industries, Inc. (NYSE:MLI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 MLI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MLI investors were disappointed as the stock returned -9.2% during the same time 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.
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