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It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT).
MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare MCFT to other stocks including Tilly's Inc (NYSE:TLYS), Duluth Holdings Inc. (NASDAQ:DLTH), and USD Partners LP (NYSE:USDP) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Cliff Asness of AQR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's check out the new hedge fund action encompassing MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT).
What have hedge funds been doing with MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MCFT over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Divisar Capital was the largest shareholder of MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), with a stake worth $18.2 million reported as of the end of September. Trailing Divisar Capital was Royce & Associates, which amassed a stake valued at $12.2 million. Renaissance Technologies, Citadel Investment Group, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), around 6.04% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, designating 1.81 percent of its 13F equity portfolio to MCFT.
Judging by the fact that MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) has faced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there were a few money managers that decided to sell off their entire stakes in the third quarter. At the top of the heap, Richard Driehaus's Driehaus Capital sold off the biggest position of all the hedgies tracked by Insider Monkey, totaling about $4.2 million in stock. Israel Englander's fund, Millennium Management, also dumped its stock, about $2.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT). We will take a look at Tilly's Inc (NYSE:TLYS), Duluth Holdings Inc. (NASDAQ:DLTH), USD Partners LP (NYSE:USDP), and Allot Ltd. (NASDAQ:ALLT). This group of stocks' market values match MCFT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TLYS,14,57115,1 DLTH,9,13309,-1 USDP,3,3292,0 ALLT,9,64237,1 Average,8.75,34488,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $76 million in MCFT's case. Tilly's Inc (NYSE:TLYS) is the most popular stock in this table. On the other hand USD Partners LP (NYSE:USDP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MCFT as the stock returned 11.3% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.