We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Manchester United PLC (NYSE:MANU).
Is Manchester United PLC (NYSE:MANU) a healthy stock for your portfolio? Prominent investors are getting less optimistic. The number of long hedge fund positions shrunk by 2 recently. Our calculations also showed that MANU isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). MANU was in 10 hedge funds' portfolios at the end of December. There were 12 hedge funds in our database with MANU positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_189625" align="aligncenter" width="399"] Tom Sandell of Sandell Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind we're going to check out the recent hedge fund action encompassing Manchester United PLC (NYSE:MANU).
How are hedge funds trading Manchester United PLC (NYSE:MANU)?
Heading into the first quarter of 2020, 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. The graph below displays the number of hedge funds with bullish position in MANU over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Manchester United PLC (NYSE:MANU) was held by Renaissance Technologies, which reported holding $15.7 million worth of stock at the end of September. It was followed by D E Shaw with a $5 million position. Other investors bullish on the company included Alyeska Investment Group, Potrero Capital Research, and Sandell Asset Management. In terms of the portfolio weights assigned to each position Potrero Capital Research allocated the biggest weight to Manchester United PLC (NYSE:MANU), around 1.92% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, earmarking 1.04 percent of its 13F equity portfolio to MANU.
Judging by the fact that Manchester United PLC (NYSE:MANU) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there exists a select few fund managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Alex Snow's Lansdowne Partners sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, worth close to $6.1 million in stock, and Ran Pang's Quantamental Technologies was right behind this move, as the fund sold off about $0 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Manchester United PLC (NYSE:MANU) but similarly valued. We will take a look at Balchem Corporation (NASDAQ:BCPC), Investors Bancorp, Inc. (NASDAQ:ISBC), SkyWest, Inc. (NASDAQ:SKYW), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). This group of stocks' market valuations match MANU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCPC,12,62978,3 ISBC,30,262465,2 SKYW,15,179258,-1 AGIO,23,309793,6 Average,20,203624,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $36 million in MANU's case. Investors Bancorp, Inc. (NASDAQ:ISBC) is the most popular stock in this table. On the other hand Balchem Corporation (NASDAQ:BCPC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Manchester United PLC (NYSE:MANU) is even less popular than BCPC. Hedge funds dodged a bullet by taking a bearish stance towards MANU. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately MANU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MANU investors were disappointed as the stock returned -26.7% 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 most of these stocks already outperformed the market so far in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.