Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 4 percentage points through September 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Medpace Holdings, Inc. (NASDAQ:MEDP) was in 15 hedge funds' portfolios at the end of the second quarter of 2019. MEDP investors should be aware of a decrease in enthusiasm from smart money lately. There were 24 hedge funds in our database with MEDP positions at the end of the previous quarter. Our calculations also showed that MEDP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the latest hedge fund action regarding Medpace Holdings, Inc. (NASDAQ:MEDP).
How have hedgies been trading Medpace Holdings, Inc. (NASDAQ:MEDP)?
At Q2's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MEDP over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Blue Harbour Group held the most valuable stake in Medpace Holdings, Inc. (NASDAQ:MEDP), which was worth $47.5 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $27.4 million worth of shares. Moreover, GLG Partners, Renaissance Technologies, and Fisher Asset Management were also bullish on Medpace Holdings, Inc. (NASDAQ:MEDP), allocating a large percentage of their portfolios to this stock.
Due to the fact that Medpace Holdings, Inc. (NASDAQ:MEDP) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of funds that decided to sell off their full holdings heading into Q3. Interestingly, Amy Mulderry's Tavio Capital sold off the largest position of the 750 funds followed by Insider Monkey, totaling about $7.5 million in stock. Israel Englander's fund, Millennium Management, also sold off its stock, about $1.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 9 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Medpace Holdings, Inc. (NASDAQ:MEDP) but similarly valued. These stocks are Appian Corporation (NASDAQ:APPN), Atlantica Yield plc (NASDAQ:AY), Welbilt, Inc. (NYSE:WBT), and MyoKardia, Inc. (NASDAQ:MYOK). All of these stocks' market caps are closest to MEDP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APPN,12,335900,-7 AY,18,203361,-3 WBT,25,850267,-2 MYOK,24,732265,-10 Average,19.75,530448,-5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $194 million in MEDP's case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 12 bullish hedge fund positions. Medpace Holdings, Inc. (NASDAQ:MEDP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on MEDP as the stock returned 28.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.