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Were Hedge Funds Right About Modine Manufacturing Company (MOD)?

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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Modine Manufacturing Company (NYSE:MOD).

Modine Manufacturing Company (NYSE:MOD) has seen a decrease in hedge fund interest lately. Modine Manufacturing Company (NYSE:MOD) was in 17 hedge funds' portfolios at the end of March. The all time high for this statistic is 20. There were 19 hedge funds in our database with MOD positions at the end of the fourth quarter. Our calculations also showed that MOD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind let's go over the new hedge fund action regarding Modine Manufacturing Company (NYSE:MOD).

Do Hedge Funds Think MOD Is A Good Stock To Buy Now?

At first quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MOD over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Modine Manufacturing Company (NYSE:MOD) was held by GAMCO Investors, which reported holding $39.9 million worth of stock at the end of December. It was followed by Royce & Associates with a $28.7 million position. Other investors bullish on the company included Driehaus Capital, D E Shaw, and Headlands Capital. In terms of the portfolio weights assigned to each position Headlands Capital allocated the biggest weight to Modine Manufacturing Company (NYSE:MOD), around 7.09% of its 13F portfolio. Roubaix Capital is also relatively very bullish on the stock, earmarking 1.78 percent of its 13F equity portfolio to MOD.

Since Modine Manufacturing Company (NYSE:MOD) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that slashed their entire stakes heading into Q2. Intriguingly, Douglas Dethy's DC Capital Partners dropped the biggest investment of all the hedgies tracked by Insider Monkey, totaling about $11.2 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund sold off about $2.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q2.

Let's now take a look at hedge fund activity in other stocks similar to Modine Manufacturing Company (NYSE:MOD). These stocks are Universal Electronics Inc (NASDAQ:UEIC), IDEAYA Biosciences, Inc. (NASDAQ:IDYA), Inhibrx, Inc. (NASDAQ:INBX), Adagene Inc. (NASDAQ:ADAG), Oasis Midstream Partners LP (NASDAQ:OMP), CBTX, Inc. (NASDAQ:CBTX), and U.S. Lime & Minerals Inc. (NASDAQ:USLM). All of these stocks' market caps are similar to MOD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UEIC,10,18048,-2 IDYA,15,133532,1 INBX,10,157122,-1 ADAG,10,18870,10 OMP,1,4355,-2 CBTX,7,16007,-1 USLM,4,47639,-1 Average,8.1,56510,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $132 million in MOD's case. IDEAYA Biosciences, Inc. (NASDAQ:IDYA) is the most popular stock in this table. On the other hand Oasis Midstream Partners LP (NASDAQ:OMP) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Modine Manufacturing Company (NYSE:MOD) is more popular among hedge funds. Our overall hedge fund sentiment score for MOD is 78.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately MOD wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MOD were disappointed as the stock returned 7.9% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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