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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Macquarie Infrastructure Corporation (NYSE:MIC).
Is MIC stock a buy? Hedge fund interest in Macquarie Infrastructure Corporation (NYSE:MIC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MIC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Copa Holdings, S.A. (NYSE:CPA), Adient plc (NYSE:ADNT), and LCI Industries (NYSE:LCII) to gather more data points.
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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Brown of Hawk Ridge Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to take a peek at the fresh hedge fund action regarding Macquarie Infrastructure Corporation (NYSE:MIC).
Do Hedge Funds Think MIC Is A Good Stock To Buy Now?
At the end of December, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MIC over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the number one position in Macquarie Infrastructure Corporation (NYSE:MIC). Eminence Capital has a $323 million position in the stock, comprising 3% of its 13F portfolio. Sitting at the No. 2 spot is Hawk Ridge Management, managed by David Brown, which holds a $109.5 million position; the fund has 8.9% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include David Rosen's Rubric Capital Management, Mario Gabelli's GAMCO Investors and Matthew Mark's Jet Capital Investors. In terms of the portfolio weights assigned to each position Litespeed Management allocated the biggest weight to Macquarie Infrastructure Corporation (NYSE:MIC), around 14.07% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, dishing out 8.86 percent of its 13F equity portfolio to MIC.
Because Macquarie Infrastructure Corporation (NYSE:MIC) has witnessed a decline in interest from the smart money, we can see that there is a sect of funds that decided to sell off their full holdings by the end of the fourth quarter. Interestingly, John Petry's Sessa Capital cut the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling close to $18.4 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $10.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Macquarie Infrastructure Corporation (NYSE:MIC). We will take a look at Copa Holdings, S.A. (NYSE:CPA), Adient plc (NYSE:ADNT), LCI Industries (NYSE:LCII), HMS Holdings Corp. (NASDAQ:HMSY), Arconic Corporation (NYSE:ARNC), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), and AllianceBernstein Holding LP (NYSE:AB). This group of stocks' market caps resemble MIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPA,21,267324,-3 ADNT,37,650911,-2 LCII,16,124857,-9 HMSY,26,239529,0 ARNC,24,904373,3 DCPH,36,673228,6 AB,9,39879,1 Average,24.1,414300,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $773 million in MIC's case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 9 bullish hedge fund positions. Macquarie Infrastructure Corporation (NYSE:MIC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MIC is 57.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on MIC as the stock returned 17.2% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.