Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about MAXIMUS, Inc. (NYSE:MMS).
Is MAXIMUS, Inc. (NYSE:MMS) a buy right now? Investors who are in the know are in a bearish mood. The number of long hedge fund bets fell by 2 in recent months. Our calculations also showed that MMS isn't among the 30 most popular stocks among hedge funds. MMS was in 20 hedge funds' portfolios at the end of the first quarter of 2019. There were 22 hedge funds in our database with MMS positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a look at the new hedge fund action regarding MAXIMUS, Inc. (NYSE:MMS).
What does the smart money think about MAXIMUS, Inc. (NYSE:MMS)?
Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MMS over the last 15 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in MAXIMUS, Inc. (NYSE:MMS) was held by GLG Partners, which reported holding $79.7 million worth of stock at the end of March. It was followed by P2 Capital Partners with a $76.1 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Renaissance Technologies.
Since MAXIMUS, Inc. (NYSE:MMS) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of money managers that elected to cut their positions entirely last quarter. It's worth mentioning that Matthew Tewksbury's Stevens Capital Management said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, valued at about $3.1 million in call options, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dumped about $1.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as MAXIMUS, Inc. (NYSE:MMS) but similarly valued. These stocks are CACI International Inc (NYSE:CACI), LendingTree, Inc (NASDAQ:TREE), Virtu Financial Inc (NASDAQ:VIRT), and Littelfuse, Inc. (NASDAQ:LFUS). This group of stocks' market caps resemble MMS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CACI,13,132826,-5 TREE,17,82935,-4 VIRT,17,93239,0 LFUS,13,248928,-2 Average,15,139482,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $288 million in MMS's case. LendingTree, Inc (NASDAQ:TREE) is the most popular stock in this table. On the other hand CACI International Inc (NYSE:CACI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks MAXIMUS, Inc. (NYSE:MMS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MMS, though not to the same extent, as the stock returned 0.8% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.