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Is MKTX A Good Stock To Buy According To Hedge Funds?

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Debasis Saha
·6 min read
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After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards MarketAxess Holdings Inc. (NASDAQ:MKTX).

Is MKTX a good stock to buy? MarketAxess Holdings Inc. (NASDAQ:MKTX) has seen an increase in enthusiasm from smart money of late. MarketAxess Holdings Inc. (NASDAQ:MKTX) was in 34 hedge funds' portfolios at the end of September. The all time high for this statistic is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with MKTX holdings at the end of June. Our calculations also showed that MKTX 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).

Video: 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

Noam Gottesman GLG Partners
Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind we're going to check out the new hedge fund action regarding MarketAxess Holdings Inc. (NASDAQ:MKTX).

Do Hedge Funds Think MKTX Is A Good Stock To Buy Now?

At third quarter's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MKTX over the last 21 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is MKTX A Good Stock To Buy?
Is MKTX A Good Stock To Buy?

The largest stake in MarketAxess Holdings Inc. (NASDAQ:MKTX) was held by Renaissance Technologies, which reported holding $465.5 million worth of stock at the end of September. It was followed by GuardCap Asset Management with a $113.6 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and GLG Partners. In terms of the portfolio weights assigned to each position GuardCap Asset Management allocated the biggest weight to MarketAxess Holdings Inc. (NASDAQ:MKTX), around 3.68% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, dishing out 1.47 percent of its 13F equity portfolio to MKTX.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into MarketAxess Holdings Inc. (NASDAQ:MKTX) headfirst. Diametric Capital, managed by Nick Thakore, initiated the most valuable position in MarketAxess Holdings Inc. (NASDAQ:MKTX). Diametric Capital had $0.9 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser's Magnetar Capital, Matthew Tewksbury's Stevens Capital Management, and Parvinder Thiara's Athanor Capital.

Let's go over hedge fund activity in other stocks similar to MarketAxess Holdings Inc. (NASDAQ:MKTX). We will take a look at Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Paycom Software Inc (NYSE:PAYC), Teladoc Health, Inc (NYSE:TDOC), Garmin Ltd. (NASDAQ:GRMN), Telefonica S.A. (NYSE:TEF), EPAM Systems Inc (NYSE:EPAM), and Maxim Integrated Products Inc. (NASDAQ:MXIM). This group of stocks' market valuations resemble MKTX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBVA,10,104422,-1 PAYC,38,655179,2 TDOC,47,997283,3 GRMN,32,515382,9 TEF,5,6896,-1 EPAM,33,574847,5 MXIM,52,1964354,19 Average,31,688338,5.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $942 million in MKTX's case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. MarketAxess Holdings Inc. (NASDAQ:MKTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MKTX is 66.9. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on MKTX as the stock returned 20.3% since the end of Q3 (through 12/18) 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.

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