The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Minerals Technologies Inc (NYSE:MTX) based on those filings.
Is Minerals Technologies Inc (NYSE:MTX) a bargain? Hedge funds are buying. The number of long hedge fund positions advanced by 2 recently. Our calculations also showed that MTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). MTX was in 16 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with MTX holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the fresh hedge fund action surrounding Minerals Technologies Inc (NYSE:MTX).
What does smart money think about Minerals Technologies Inc (NYSE:MTX)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in MTX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Minerals Technologies Inc (NYSE:MTX), with a stake worth $23.5 million reported as of the end of September. Trailing Royce & Associates was Arrowstreet Capital, which amassed a stake valued at $8.9 million. AQR Capital Management, GAMCO Investors, and Marshall Wace LLP 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 Royce & Associates allocated the biggest weight to Minerals Technologies Inc (NYSE:MTX), around 0.32% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.22 percent of its 13F equity portfolio to MTX.
Consequently, key hedge funds were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, initiated the most outsized position in Minerals Technologies Inc (NYSE:MTX). Laurion Capital Management had $0.4 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.4 million position during the quarter. The only other fund with a brand new MTX position is Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks similar to Minerals Technologies Inc (NYSE:MTX). We will take a look at Walker & Dunlop Inc. (NYSE:WD), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), PRA Group, Inc. (NASDAQ:PRAA), and Twist Bioscience Corporation (NASDAQ:TWST). All of these stocks’ market caps are similar to MTX’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WD,19,53136,-6 MTSI,16,153392,-2 PRAA,14,51314,2 TWST,16,216481,1 Average,16.25,118581,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $67 million in MTX’s case. Walker & Dunlop Inc. (NYSE:WD) is the most popular stock in this table. On the other hand PRA Group, Inc. (NASDAQ:PRAA) is the least popular one with only 14 bullish hedge fund positions. Minerals Technologies Inc (NYSE:MTX) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on MTX, though not to the same extent, as the stock returned 21.5% during the second quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.