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In this article we will analyze whether Matthews International Corp (NASDAQ:MATW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is MATW a good stock to buy now? Hedge fund interest in Matthews International Corp (NASDAQ:MATW) shares was flat at the end of last quarter. This is usually a negative indicator. 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 for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as NV5 Global Inc (NASDAQ:NVEE), S & T Bancorp Inc (NASDAQ:STBA), and Codexis, Inc. (NASDAQ:CDXS) to gather more data points.
Video: 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 S&P 500 ETFs by more than 66 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 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.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to take a look at the latest hedge fund action regarding Matthews International Corp (NASDAQ:MATW).
Do Hedge Funds Think MATW Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in MATW a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Matthews International Corp (NASDAQ:MATW). GAMCO Investors has a $19.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $10 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include D. E. Shaw's D E Shaw, John W. Rogers's Ariel Investments and Peter Schliemann's Rutabaga Capital Management. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to Matthews International Corp (NASDAQ:MATW), around 2.81% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.22 percent of its 13F equity portfolio to MATW.
Since Matthews International Corp (NASDAQ:MATW) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of fund managers that decided to sell off their entire stakes last quarter. At the top of the heap, Michael Gelband's ExodusPoint Capital dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, worth close to $0.5 million in stock, and Roger Ibbotson's Zebra Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors 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 Matthews International Corp (NASDAQ:MATW). We will take a look at NV5 Global Inc (NASDAQ:NVEE), S & T Bancorp Inc (NASDAQ:STBA), Codexis, Inc. (NASDAQ:CDXS), Personalis, Inc. (NASDAQ:PSNL), Stratasys, Ltd. (NASDAQ:SSYS), Echo Global Logistics, Inc. (NASDAQ:ECHO), and Great Western Bancorp Inc (NYSE:GWB). All of these stocks' market caps are closest to MATW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVEE,9,16322,2 STBA,5,3722,-1 CDXS,13,149244,0 PSNL,11,50609,3 SSYS,16,57470,-3 ECHO,14,33553,1 GWB,14,28097,-4 Average,11.7,48431,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $66 million in MATW's case. Stratasys, Ltd. (NASDAQ:SSYS) is the most popular stock in this table. On the other hand S & T Bancorp Inc (NASDAQ:STBA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Matthews International Corp (NASDAQ:MATW) is more popular among hedge funds. Our overall hedge fund sentiment score for MATW is 85. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on MATW as the stock returned 20.8% since the end of September (through 12/14) 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.
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Disclosure: None. This article was originally published at Insider Monkey.