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Was The Smart Money Right About Loading Up On MarketAxess Holdings Inc. (MKTX)?

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Asma UL Husna
·6 min read
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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to MarketAxess Holdings Inc. (NASDAQ:MKTX) changed recently.

MarketAxess Holdings Inc. (NASDAQ:MKTX) shareholders have witnessed an increase in enthusiasm from smart money in recent months. MarketAxess Holdings Inc. (NASDAQ:MKTX) was in 33 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MKTX isn't among the 30 most popular stocks among hedge funds (click for Q2 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 several gauges market participants use to evaluate their holdings. A couple of the most innovative gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace the market by a very impressive margin (see the details here).

Paul Marshall Marshall Wace
Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let's check out the recent hedge fund action regarding MarketAxess Holdings Inc. (NASDAQ:MKTX).

How have hedgies been trading MarketAxess Holdings Inc. (NASDAQ:MKTX)?

At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in MKTX over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

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

According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in MarketAxess Holdings Inc. (NASDAQ:MKTX), worth close to $518.7 million, corresponding to 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is GuardCap Asset Management, managed by Guardian Capital, which holds a $104.9 million position; the fund has 4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Ken Griffin's Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position GuardCap Asset Management allocated the biggest weight to MarketAxess Holdings Inc. (NASDAQ:MKTX), around 4.03% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, dishing out 2.15 percent of its 13F equity portfolio to MKTX.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in MarketAxess Holdings Inc. (NASDAQ:MKTX). Marshall Wace LLP had $8.8 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also made a $8 million investment in the stock during the quarter. The other funds with brand new MKTX positions are Matthew Hulsizer's PEAK6 Capital Management, Andrew Dalrymple and Barry McCorkell's Aubrey Capital Management, and Brian Ashford-Russell and Tim Woolley's Polar Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as MarketAxess Holdings Inc. (NASDAQ:MKTX) but similarly valued. These stocks are Keysight Technologies Inc (NYSE:KEYS), Wipro Limited (NYSE:WIT), Entergy Corporation (NYSE:ETR), The Trade Desk, Inc. (NASDAQ:TTD), Wayfair Inc (NYSE:W), Garmin Ltd. (NASDAQ:GRMN), and Coupa Software Incorporated (NASDAQ:COUP). All of these stocks' market caps are similar to MKTX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KEYS,47,564484,7 WIT,7,59120,0 ETR,32,953385,-2 TTD,20,513971,-5 W,41,3533920,7 GRMN,23,398083,-4 COUP,50,3002984,-16 Average,31.4,1289421,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $1289 million. That figure was $918 million in MKTX's case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 7 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 70.2. 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 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on MKTX, though not to the same extent, as the stock returned 7.7% since Q2 (through October 30th) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.

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