We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Maxar Technologies Inc. (NYSE:MAXR).
Is Maxar Technologies Inc. (NYSE:MAXR) ready to rally soon? The best stock pickers are turning bullish. The number of long hedge fund bets rose by 7 in recent months. Our calculations also showed that MAXR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s analyze the latest hedge fund action surrounding Maxar Technologies Inc. (NYSE:MAXR).
How are hedge funds trading Maxar Technologies Inc. (NYSE:MAXR)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 58% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in MAXR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Alyeska Investment Group was the largest shareholder of Maxar Technologies Inc. (NYSE:MAXR), with a stake worth $14.4 million reported as of the end of September. Trailing Alyeska Investment Group was Point State Capital, which amassed a stake valued at $5.8 million. D E Shaw, Sound Point Capital, and Millennium Management 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 Sound Point Capital allocated the biggest weight to Maxar Technologies Inc. (NYSE:MAXR), around 2.26% of its 13F portfolio. One Tusk Investment Partners is also relatively very bullish on the stock, dishing out 1.2 percent of its 13F equity portfolio to MAXR.
With a general bullishness amongst the heavyweights, some big names have jumped into Maxar Technologies Inc. (NYSE:MAXR) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Maxar Technologies Inc. (NYSE:MAXR). Marshall Wace had $1.8 million invested in the company at the end of the quarter. Vivian Lau’s One Tusk Investment Partners also initiated a $1 million position during the quarter. The other funds with brand new MAXR positions are Paul Tudor Jones’s Tudor Investment Corp, John Thiessen’s Vertex One Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s check out hedge fund activity in other stocks similar to Maxar Technologies Inc. (NYSE:MAXR). These stocks are OMNOVA Solutions Inc. (NYSE:OMN), Sundial Growers Inc. (NASDAQ:SNDL), Magic Software Enterprises Ltd. (NASDAQ:MGIC), and Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST). This group of stocks’ market caps are similar to MAXR’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OMN,19,96489,3 SNDL,8,22374,8 MGIC,2,4833,-1 VIST,8,65440,8 Average,9.25,47284,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $37 million in MAXR’s case. OMNOVA Solutions Inc. (NYSE:OMN) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 2 bullish hedge fund positions. Maxar Technologies Inc. (NYSE:MAXR) is the most popular stock in this group together with OMN. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MAXR as the stock returned 36.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.