While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 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).
Is Macquarie Infrastructure Corporation (NYSE:MIC) going to take off soon? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions went up by 2 lately. Macquarie Infrastructure Corporation (NYSE:MIC) was in 33 hedge funds' portfolios at the end of March. The all time high for this statistic is 69. Our calculations also showed that MIC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 115 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.
Nathaniel August - Mangrove Partners
Nathaniel August of Mangrove Partners
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 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Now we're going to view the key hedge fund action regarding Macquarie Infrastructure Corporation (NYSE:MIC).
Do Hedge Funds Think MIC Is A Good Stock To Buy Now?
At Q1's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in MIC a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Eminence Capital held the most valuable stake in Macquarie Infrastructure Corporation (NYSE:MIC), which was worth $224.3 million at the end of the fourth quarter. On the second spot was Sandbar Asset Management which amassed $61.7 million worth of shares. Rubric Capital Management, GAMCO Investors, and Jet Capital Investors 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 11.17% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, dishing out 8.18 percent of its 13F equity portfolio to MIC.
As aggregate interest increased, some big names were breaking ground themselves. Sandbar Asset Management, managed by Michael Cowley, assembled the largest position in Macquarie Infrastructure Corporation (NYSE:MIC). Sandbar Asset Management had $61.7 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $24.3 million position during the quarter. The other funds with brand new MIC positions are Nathaniel August's Mangrove Partners, Noam Gottesman's GLG Partners, and Michael Bilger's 59 North Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Macquarie Infrastructure Corporation (NYSE:MIC) but similarly valued. These stocks are CarGurus, Inc. (NASDAQ:CARG), Brady Corp (NYSE:BRC), Greif, Inc. (NYSE:GEF), Independent Bank Corp (NASDAQ:INDB), Axos Financial, Inc. (NYSE:AX), Fulton Financial Corp (NASDAQ:FULT), and INMODE LTD. (NASDAQ:INMD). All of these stocks' market caps match MIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CARG,29,266502,-4 BRC,16,137441,1 GEF,13,127687,0 INDB,11,20641,4 AX,13,36746,0 FULT,7,37687,-8 INMD,23,214212,0 Average,16,120131,-1 [/table]
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $663 million in MIC's case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand Fulton Financial Corp (NASDAQ:FULT) 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 71.3. 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 returned 22.8% in 2021 through July 2nd but still managed to beat the market by 6 percentage points. Hedge funds were also right about betting on MIC as the stock returned 21.9% since the end of March (through 7/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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