The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought MGIC Investment Corporation (NYSE:MTG) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
MGIC Investment Corporation (NYSE:MTG) has seen a decrease in enthusiasm from smart money of late. MGIC Investment Corporation (NYSE:MTG) was in 40 hedge funds' portfolios at the end of June. The all time high for this statistics is 47. Our calculations also showed that MTG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital 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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now we're going to take a gander at the recent hedge fund action encompassing MGIC Investment Corporation (NYSE:MTG).
Hedge fund activity in MGIC Investment Corporation (NYSE:MTG)
At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in MTG a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, GLG Partners held the most valuable stake in MGIC Investment Corporation (NYSE:MTG), which was worth $34.4 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $27.3 million worth of shares. Oaktree Capital Management, Arrowstreet Capital, and Moore Global Investments 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 Almitas Capital allocated the biggest weight to MGIC Investment Corporation (NYSE:MTG), around 3.96% of its 13F portfolio. Berylson Capital Partners is also relatively very bullish on the stock, designating 3.06 percent of its 13F equity portfolio to MTG.
Seeing as MGIC Investment Corporation (NYSE:MTG) has experienced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedge funds who were dropping their positions entirely by the end of the second quarter. It's worth mentioning that Sander Gerber's Hudson Bay Capital Management dropped the largest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $3.8 million in stock. Lawrence Kam's fund, Sonic Capital, also dropped its stock, about $3.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.
Let's check out hedge fund activity in other stocks similar to MGIC Investment Corporation (NYSE:MTG). We will take a look at NorthWestern Corporation (NYSE:NWE), Mantech International Corp (NASDAQ:MANT), White Mountains Insurance Group Ltd (NYSE:WTM), Avnet, Inc. (NASDAQ:AVT), Burning Rock Biotech Limited (NASDAQ:BNR), H&R Block, Inc. (NYSE:HRB), and Cushman & Wakefield plc (NYSE:CWK). All of these stocks' market caps resemble MTG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NWE,22,96622,3 MANT,16,29262,-1 WTM,11,116150,-5 AVT,29,553892,5 BNR,18,240649,18 HRB,24,206807,5 CWK,17,101994,2 Average,19.6,192197,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $263 million in MTG's case. Avnet, Inc. (NASDAQ:AVT) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks MGIC Investment Corporation (NYSE:MTG) is more popular among hedge funds. Our overall hedge fund sentiment score for MTG is 79.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately MTG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MTG were disappointed as the stock returned 12.8% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.