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Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let's see whether Mizuho Financial Group Inc. (NYSE:MFG) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Mizuho Financial Group Inc. (NYSE:MFG) has experienced an increase in enthusiasm from smart money of late. MFG was in 5 hedge funds' portfolios at the end of December. There were 4 hedge funds in our database with MFG positions at the end of the previous quarter. Our calculations also showed that MFG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
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Jim Simons of Renaissance Technologies[/caption]
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we're going to take a look at the recent hedge fund action regarding Mizuho Financial Group Inc. (NYSE:MFG).
What does smart money think about Mizuho Financial Group Inc. (NYSE:MFG)?
At Q4's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MFG over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies, managed by the largest position in Mizuho Financial Group Inc. (NYSE:MFG). Renaissance Technologies has a $13.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies's heels is D E Shaw, led by D. E. Shaw, holding a $0.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Paul Marshall and Ian Wace's Marshall Wace LLP. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Mizuho Financial Group Inc. (NYSE:MFG), around 0.01% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, setting aside 0.0011 percent of its 13F equity portfolio to MFG.
As industrywide interest jumped, specific money managers have jumped into Mizuho Financial Group Inc. (NYSE:MFG) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Mizuho Financial Group Inc. (NYSE:MFG). Two Sigma Advisors had $0.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $0 million position during the quarter.
Let's go over hedge fund activity in other stocks similar to Mizuho Financial Group Inc. (NYSE:MFG). We will take a look at Eaton Corporation plc (NYSE:ETN), Marathon Petroleum Corp (NYSE:MPC), Royal Bank of Scotland Group plc (NYSE:RBS), and AFLAC Incorporated (NYSE:AFL). This group of stocks' market valuations are closest to MFG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETN,42,1224237,8 MPC,69,2759103,1 RBS,5,37114,0 AFL,32,511962,1 Average,37,1133104,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1133 million. That figure was $15 million in MFG's case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Mizuho Financial Group Inc. (NYSE:MFG) is even less popular than RBS. Hedge funds dodged a bullet by taking a bearish stance towards MFG. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately MFG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MFG investors were disappointed as the stock returned -26.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.