Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Is MDU Resources Group Inc (NYSE:MDU) a worthy stock to buy now? Hedge funds are in a pessimistic mood. The number of long hedge fund bets retreated by 6 in recent months. Our calculations also showed that mdu isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the recent hedge fund action surrounding MDU Resources Group Inc (NYSE:MDU).
What does the smart money think about MDU Resources Group Inc (NYSE:MDU)?
Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MDU over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in MDU Resources Group Inc (NYSE:MDU) was held by Citadel Investment Group, which reported holding $61.9 million worth of stock at the end of March. It was followed by AQR Capital Management with a $23.9 million position. Other investors bullish on the company included Two Sigma Advisors, Renaissance Technologies, and ExodusPoint Capital.
Judging by the fact that MDU Resources Group Inc (NYSE:MDU) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there were a few hedgies who were dropping their entire stakes by the end of the third quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $25 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dumped its stock, about $3.5 million worth. These moves are interesting, as total hedge fund interest dropped by 6 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as MDU Resources Group Inc (NYSE:MDU) but similarly valued. We will take a look at JBG SMITH Properties (NYSE:JBGS), ITT Inc. (NYSE:ITT), Crane Co. (NYSE:CR), and Insperity Inc (NYSE:NSP). This group of stocks' market values are closest to MDU's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JBGS,17,312625,-3 ITT,22,395262,-3 CR,22,334024,-1 NSP,24,458494,0 Average,21.25,375101,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $375 million. That figure was $189 million in MDU's case. Insperity Inc (NYSE:NSP) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) is the least popular one with only 17 bullish hedge fund positions. MDU Resources Group Inc (NYSE:MDU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately MDU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MDU investors were disappointed as the stock returned -5% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.