We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Myers Industries, Inc. (NYSE:MYE) and determine whether hedge funds skillfully traded this stock.
Myers Industries, Inc. (NYSE:MYE) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare MYE to other stocks including Wabash National Corporation (NYSE:WNC), Intersect ENT Inc (NASDAQ:XENT), and The Hackett Group, Inc. (NASDAQ:HCKT) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_746893" align="aligncenter" width="400"] Paul Marshall of Marshall Wace[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 15 largest gold producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a glance at the fresh hedge fund action encompassing Myers Industries, Inc. (NYSE:MYE).
What does smart money think about Myers Industries, Inc. (NYSE:MYE)?
Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in MYE a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli's GAMCO Investors has the most valuable position in Myers Industries, Inc. (NYSE:MYE), worth close to $40.7 million, corresponding to 0.5% of its total 13F portfolio. On GAMCO Investors's heels is Renaissance Technologies, with a $19.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, D. E. Shaw's D E Shaw and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Myers Industries, Inc. (NYSE:MYE), around 0.48% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, designating 0.36 percent of its 13F equity portfolio to MYE.
Due to the fact that Myers Industries, Inc. (NYSE:MYE) has experienced a decline in interest from hedge fund managers, it's safe to say that there was a specific group of fund managers that decided to sell off their positions entirely by the end of the first quarter. Interestingly, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, worth an estimated $0.3 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund cut about $0.1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Myers Industries, Inc. (NYSE:MYE) but similarly valued. These stocks are Wabash National Corporation (NYSE:WNC), Intersect ENT Inc (NASDAQ:XENT), The Hackett Group, Inc. (NASDAQ:HCKT), and AnaptysBio, Inc. (NASDAQ:ANAB). This group of stocks' market values match MYE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WNC,16,27269,4 XENT,20,77242,-1 HCKT,18,87972,2 ANAB,25,231710,-2 Average,19.75,106048,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $71 million in MYE's case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand Wabash National Corporation (NYSE:WNC) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Myers Industries, Inc. (NYSE:MYE) is even less popular than WNC. Hedge funds clearly dropped the ball on MYE as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on MYE as the stock returned 28.6% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.