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Is Matthews International Corp (NASDAQ:MATW) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Matthews International Corp (NASDAQ:MATW) worth your attention right now? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets went down by 4 lately. Our calculations also showed that MATW isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. We're going to take a peek at the new hedge fund action surrounding Matthews International Corp (NASDAQ:MATW).
How have hedgies been trading Matthews International Corp (NASDAQ:MATW)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in MATW a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in Matthews International Corp (NASDAQ:MATW), which was worth $14.6 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $8.2 million worth of shares. Rutabaga Capital Management, D E Shaw, and Renaissance Technologies 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 Rutabaga Capital Management allocated the biggest weight to Matthews International Corp (NASDAQ:MATW), around 2.85% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.57 percent of its 13F equity portfolio to MATW.
Because Matthews International Corp (NASDAQ:MATW) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who were dropping their entire stakes by the end of the third quarter. It's worth mentioning that Benjamin A. Smith's Laurion Capital Management dropped the largest position of the "upper crust" of funds monitored by Insider Monkey, worth about $1 million in stock, and Paul Marshall and Ian Wace's Marshall Wace was right behind this move, as the fund dropped about $0.9 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Matthews International Corp (NASDAQ:MATW). These stocks are AMC Entertainment Holdings Inc (NYSE:AMC), Opera Limited (NASDAQ:OPRA), Five Point Holdings, LLC (NYSE:FPH), and Oasis Petroleum Inc. (NYSE:OAS). This group of stocks' market valuations are similar to MATW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMC,12,97465,-4 OPRA,13,26943,7 FPH,14,255856,0 OAS,15,160691,-6 Average,13.5,135239,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $38 million in MATW's case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand AMC Entertainment Holdings Inc (NYSE:AMC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Matthews International Corp (NASDAQ:MATW) is even less popular than AMC. 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. A small number of hedge funds were also right about betting on MATW, though not to the same extent, as the stock returned 9% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.