Is Morningstar, Inc. (NASDAQ:MORN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is MORN a good stock to buy? Morningstar, Inc. (NASDAQ:MORN) has experienced an increase in enthusiasm from smart money lately. Morningstar, Inc. (NASDAQ:MORN) was in 21 hedge funds' portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that MORN 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let's take a peek at the latest hedge fund action regarding Morningstar, Inc. (NASDAQ:MORN).
Do Hedge Funds Think MORN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MORN over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Morningstar, Inc. (NASDAQ:MORN), which was worth $116.3 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $92.3 million worth of shares. Royce & Associates, Millennium Management, and Arrowstreet Capital 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 Becker Drapkin Management allocated the biggest weight to Morningstar, Inc. (NASDAQ:MORN), around 5.16% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, dishing out 1.43 percent of its 13F equity portfolio to MORN.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Incline Global Management, managed by Jeff Lignelli, created the most valuable position in Morningstar, Inc. (NASDAQ:MORN). Incline Global Management had $7.5 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $1.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's now review hedge fund activity in other stocks similar to Morningstar, Inc. (NASDAQ:MORN). We will take a look at UGI Corp (NYSE:UGI), Vedanta Ltd (NYSE:VEDL), iRhythm Technologies, Inc. (NASDAQ:IRTC), B2Gold Corp (NYSE:BTG), American Well Corporation (NYSE:AMWL), Omega Healthcare Investors Inc (NYSE:OHI), and Sensata Technologies Holding plc (NYSE:ST). This group of stocks' market values resemble MORN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UGI,23,181941,-3 VEDL,9,33062,0 IRTC,26,445527,5 BTG,17,583145,-1 AMWL,25,306967,25 OHI,19,106290,-4 ST,37,1469542,4 Average,22.3,446639,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $447 million. That figure was $377 million in MORN's case. Sensata Technologies Holding plc (NYSE:ST) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 9 bullish hedge fund positions. Morningstar, Inc. (NASDAQ:MORN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MORN is 52.6. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on MORN as the stock returned 29.8% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.