While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Macquarie Infrastructure Corporation (NYSE:MIC).
Macquarie Infrastructure Corporation (NYSE:MIC) investors should be aware of an increase in enthusiasm from smart money recently. Macquarie Infrastructure Corporation (NYSE:MIC) was in 38 hedge funds' portfolios at the end of June. The all time high for this statistics is 69. Our calculations also showed that MIC 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.
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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Bronchick of Cove Street Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. Keeping this in mind we're going to check out the new hedge fund action surrounding Macquarie Infrastructure Corporation (NYSE:MIC).
What does smart money think about Macquarie Infrastructure Corporation (NYSE:MIC)?
Heading into the third quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in MIC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eminence Capital was the largest shareholder of Macquarie Infrastructure Corporation (NYSE:MIC), with a stake worth $239.4 million reported as of the end of June. Trailing Eminence Capital was Hawk Ridge Management, which amassed a stake valued at $38.6 million. GAMCO Investors, Rubric Capital Management, and Cove Street 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 Litespeed Management allocated the biggest weight to Macquarie Infrastructure Corporation (NYSE:MIC), around 17.66% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, designating 5.44 percent of its 13F equity portfolio to MIC.
Now, specific money managers were leading the bulls' herd. Hawk Ridge Management, managed by David Brown, assembled the largest position in Macquarie Infrastructure Corporation (NYSE:MIC). Hawk Ridge Management had $38.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $22.8 million position during the quarter. The other funds with brand new MIC positions are John Petry's Sessa Capital, Matthew Mark's Jet Capital Investors, and Phill Gross and Robert Atchinson's Adage Capital Management.
Let's go over hedge fund activity in other stocks similar to Macquarie Infrastructure Corporation (NYSE:MIC). We will take a look at Itron, Inc. (NASDAQ:ITRI), AllianceBernstein Holding LP (NYSE:AB), Endava plc (NYSE:DAVA), Compania Cervecerias Unidas S.A. (NYSE:CCU), Millicom International Cellular S.A. (NASDAQ:TIGO), SLM Corp (NASDAQ:SLM), and United States Cellular Corporation (NYSE:USM). This group of stocks' market caps are similar to MIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITRI,13,300874,-6 AB,7,23909,0 DAVA,8,76269,-1 CCU,8,22635,-3 TIGO,8,61613,1 SLM,32,462666,5 USM,16,97313,4 Average,13.1,149326,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $564 million in MIC's case. SLM Corp (NASDAQ:SLM) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Macquarie Infrastructure Corporation (NYSE:MIC) is more popular among hedge funds. Our overall hedge fund sentiment score for MIC is 76.5. 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. Unfortunately MIC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MIC were disappointed as the stock returned -15.9% since the end of the second quarter (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.