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Is Mine Safety Appliances (MSA) A Good Stock To Buy?

Debasis Saha

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Mine Safety Appliances (NYSE:MSA) based on that data.

Is Mine Safety Appliances (NYSE:MSA) going to take off soon? Hedge funds are taking a bearish view. The number of long hedge fund bets went down by 5 in recent months. Our calculations also showed that MSA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="alignnone" width="600"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the latest hedge fund action regarding Mine Safety Appliances (NYSE:MSA).

What does smart money think about Mine Safety Appliances (NYSE:MSA)?

Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MSA over the last 17 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.

Is MSA A Good Stock To Buy?

More specifically, AQR Capital Management was the largest shareholder of Mine Safety Appliances (NYSE:MSA), with a stake worth $28.1 million reported as of the end of September. Trailing AQR Capital Management was Royce & Associates, which amassed a stake valued at $12.6 million. GLG Partners, Holocene Advisors, and Citadel Investment Group 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 Royce & Associates allocated the biggest weight to Mine Safety Appliances (NYSE:MSA), around 0.12% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to MSA.

Since Mine Safety Appliances (NYSE:MSA) has faced falling interest from the aggregate hedge fund industry, we can see that there is a sect of funds who were dropping their full holdings by the end of the third quarter. Interestingly, Renaissance Technologies sold off the largest position of the 750 funds tracked by Insider Monkey, comprising about $5.4 million in stock. Israel Englander's fund, Millennium Management, also sold off its stock, about $1.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Mine Safety Appliances (NYSE:MSA) but similarly valued. We will take a look at VEON Ltd. (NASDAQ:VEON), Janus Henderson Group plc (NYSE:JHG), Affiliated Managers Group, Inc. (NYSE:AMG), and Amedisys Inc (NASDAQ:AMED). This group of stocks' market values match MSA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VEON,11,44206,-1 JHG,14,183137,-1 AMG,20,446109,0 AMED,21,197534,-3 Average,16.5,217747,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $52 million in MSA's case. Amedisys Inc (NASDAQ:AMED) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Mine Safety Appliances (NYSE:MSA) is even less popular than VEON. Hedge funds clearly dropped the ball on MSA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MSA as the stock returned 14% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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