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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Methanex Corporation (NASDAQ:MEOH).
Is Methanex Corporation (NASDAQ:MEOH) an excellent investment now? Prominent investors were getting less bullish. The number of bullish hedge fund positions were cut by 1 recently. Methanex Corporation (NASDAQ:MEOH) was in 16 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. Our calculations also showed that MEOH 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). There were 17 hedge funds in our database with MEOH holdings at the end of June.
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.
David Siegel of Two Sigma Advisors
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 check out the fresh hedge fund action surrounding Methanex Corporation (NASDAQ:MEOH).
Do Hedge Funds Think MEOH Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MEOH over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Methanex Corporation (NASDAQ:MEOH), which was worth $37.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $20.6 million worth of shares. Two Sigma Advisors, Point72 Asset Management, and Moon Capital 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 Moon Capital allocated the biggest weight to Methanex Corporation (NASDAQ:MEOH), around 2.24% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to MEOH.
Judging by the fact that Methanex Corporation (NASDAQ:MEOH) has experienced bearish sentiment from the smart money, it's safe to say that there is a sect of hedge funds who sold off their positions entirely heading into Q4. At the top of the heap, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $0.6 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund cut about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Methanex Corporation (NASDAQ:MEOH). We will take a look at CareDx, Inc. (NASDAQ:CDNA), Hilltop Holdings Inc. (NYSE:HTH), Cantel Medical Corp. (NYSE:CMD), Corsair Gaming, Inc. (NASDAQ:CRSR), Akcea Therapeutics, Inc. (NASDAQ:AKCA), Rush Enterprises, Inc. (NASDAQ:RUSHA), and AdaptHealth Corp. (NASDAQ:AHCO). This group of stocks' market caps are similar to MEOH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDNA,25,228629,2 HTH,25,120224,2 CMD,21,205405,2 CRSR,13,67972,13 AKCA,13,21755,2 RUSHA,17,71980,-1 AHCO,14,251745,2 Average,18.3,138244,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $90 million in MEOH's case. CareDx, Inc. (NASDAQ:CDNA) is the most popular stock in this table. On the other hand Corsair Gaming, Inc. (NASDAQ:CRSR) is the least popular one with only 13 bullish hedge fund positions. Methanex Corporation (NASDAQ:MEOH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MEOH is 38.3. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on MEOH as the stock returned 74.7% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.