We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Magna International Inc. (NYSE:MGA).
Magna International Inc. (NYSE:MGA) was in 14 hedge funds' portfolios at the end of the second quarter of 2019. MGA has seen a decrease in enthusiasm from smart money recently. There were 27 hedge funds in our database with MGA holdings at the end of the previous quarter. Our calculations also showed that MGA isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are assumed to be slow, outdated investment vehicles of the past. While there are over 8000 funds in operation at present, We hone in on the top tier of this group, about 750 funds. It is estimated that this group of investors orchestrate the majority of all hedge funds' total capital, and by observing their inimitable picks, Insider Monkey has identified a few investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the latest hedge fund action surrounding Magna International Inc. (NYSE:MGA).
What does smart money think about Magna International Inc. (NYSE:MGA)?
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -48% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MGA over the last 16 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Magna International Inc. (NYSE:MGA), which was worth $127.5 million at the end of the second quarter. On the second spot was East Side Capital (RR Partners) which amassed $49.9 million worth of shares. Moreover, Two Sigma Advisors, D E Shaw, and Redwood Capital Management were also bullish on Magna International Inc. (NYSE:MGA), allocating a large percentage of their portfolios to this stock.
Because Magna International Inc. (NYSE:MGA) has witnessed falling interest from the smart money, it's safe to say that there was a specific group of fund managers who were dropping their entire stakes heading into Q3. Interestingly, Cliff Asness's AQR Capital Management cut the biggest stake of the 750 funds monitored by Insider Monkey, totaling close to $199.5 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund dumped about $32.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 13 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to Magna International Inc. (NYSE:MGA). We will take a look at Markel Corporation (NYSE:MKL), Teleflex Incorporated (NYSE:TFX), Genuine Parts Company (NYSE:GPC), and Sasol Limited (NYSE:SSL). This group of stocks' market values resemble MGA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKL,25,1300425,2 TFX,25,880362,6 GPC,20,315972,-2 SSL,8,19687,3 Average,19.5,629112,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $258 million in MGA's case. Markel Corporation (NYSE:MKL) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 8 bullish hedge fund positions. Magna International Inc. (NYSE:MGA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on MGA as the stock returned 8.1% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.