Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Mylan N.V. (NASDAQ:MYL).
Is Mylan N.V. (NASDAQ:MYL) an attractive investment now? Investors who are in the know are buying. The number of long hedge fund positions improved by 3 recently. Our calculations also showed that MYL isn't among the 30 most popular stocks among hedge funds.
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' 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's analyze the recent hedge fund action surrounding Mylan N.V. (NASDAQ:MYL).
What have hedge funds been doing with Mylan N.V. (NASDAQ:MYL)?
Heading into the first quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MYL over the last 14 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Mylan N.V. (NASDAQ:MYL), with a stake worth $574.2 million reported as of the end of September. Trailing Pzena Investment Management was Paulson & Co, which amassed a stake valued at $301.5 million. First Pacific Advisors LLC, AQR Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Rubric Capital Management, managed by David Rosen, initiated the most outsized position in Mylan N.V. (NASDAQ:MYL). Rubric Capital Management had $27.7 million invested in the company at the end of the quarter. Stephen DuBois's Camber Capital Management also made a $27.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Joel Greenblatt's Gotham Asset Management, Arthur B Cohen and Joseph Healey's Healthcor Management LP, and Michael Castor's Sio Capital.
Let's go over hedge fund activity in other stocks similar to Mylan N.V. (NASDAQ:MYL). These stocks are Genuine Parts Company (NYSE:GPC), Maxim Integrated Products Inc. (NASDAQ:MXIM), CMS Energy Corporation (NYSE:CMS), and Citizens Financial Group Inc (NYSE:CFG). This group of stocks' market values are similar to MYL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPC,29,457675,8 MXIM,24,341591,-6 CMS,21,339800,-1 CFG,43,1363944,1 Average,29.25,625753,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $626 million. That figure was $2229 million in MYL's case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand CMS Energy Corporation (NYSE:CMS) is the least popular one with only 21 bullish hedge fund positions. Mylan N.V. (NASDAQ:MYL) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately MYL wasn't in this group. Hedge funds that bet on MYL were disappointed as the stock returned 2.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.