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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards MAXIMUS, Inc. (NYSE:MMS).
Is MMS stock a buy? Money managers were taking a bullish view. The number of long hedge fund positions inched up by 2 recently. MAXIMUS, Inc. (NYSE:MMS) was in 24 hedge funds' portfolios at the end of December. The all time high for this statistic is 26. Our calculations also showed that MMS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Today there are tons of methods investors use to assess their holdings. A couple of the less known methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best money managers can outclass the market by a superb margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now 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. Now let's review the new hedge fund action surrounding MAXIMUS, Inc. (NYSE:MMS).
Do Hedge Funds Think MMS Is A Good Stock To Buy Now?
At Q4's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in MMS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in MAXIMUS, Inc. (NYSE:MMS), worth close to $26.6 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is Ken Griffin of Citadel Investment Group, with a $19.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain Noam Gottesman's GLG Partners, Cliff Asness's AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to MAXIMUS, Inc. (NYSE:MMS), around 2.28% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, earmarking 1.55 percent of its 13F equity portfolio to MMS.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Holocene Advisors, managed by Brandon Haley, assembled the largest position in MAXIMUS, Inc. (NYSE:MMS). Holocene Advisors had $2.3 million invested in the company at the end of the quarter. Mika Toikka's AlphaCrest Capital Management also initiated a $1.2 million position during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Dmitry Balyasny's Balyasny Asset Management, and Hoon Kim's Quantinno Capital.
Let's now review hedge fund activity in other stocks similar to MAXIMUS, Inc. (NYSE:MMS). We will take a look at RBC Bearings Incorporated (NASDAQ:ROLL), ACI Worldwide Inc (NASDAQ:ACIW), Nomad Foods Limited (NYSE:NOMD), Acadia Healthcare Company Inc (NASDAQ:ACHC), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), and Acuity Brands, Inc. (NYSE:AYI). All of these stocks' market caps resemble MMS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROLL,14,48268,-4 ACIW,30,721729,1 NOMD,28,385214,-3 ACHC,29,517678,5 ARNA,39,895131,-4 RETA,24,359598,-1 AYI,29,810405,-9 Average,27.6,534003,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $534 million. That figure was $144 million in MMS's case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 14 bullish hedge fund positions. MAXIMUS, Inc. (NYSE:MMS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MMS is 54.7. 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 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on MMS as the stock returned 31.2% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.