Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Manpowergroup Inc (NYSE:MAN) investors should pay attention to a decrease in hedge fund sentiment lately. MAN was in 19 hedge funds' portfolios at the end of the first quarter of 2019. There were 25 hedge funds in our database with MAN holdings at the end of the previous quarter. Our calculations also showed that man isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to go over the recent hedge fund action surrounding Manpowergroup Inc (NYSE:MAN).
What have hedge funds been doing with Manpowergroup Inc (NYSE:MAN)?
Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MAN over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Manpowergroup Inc (NYSE:MAN), with a stake worth $202.1 million reported as of the end of March. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $60.3 million. Balyasny Asset Management, Two Sigma Advisors, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Manpowergroup Inc (NYSE:MAN) has faced falling interest from the smart money, logic holds that there is a sect of hedgies that slashed their full holdings heading into Q3. At the top of the heap, Israel Englander's Millennium Management sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, worth close to $34.1 million in stock. Jeffrey Talpins's fund, Element Capital Management, also said goodbye to its stock, about $2.4 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds heading into Q3.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Manpowergroup Inc (NYSE:MAN) but similarly valued. These stocks are Nexstar Media Group, Inc. (NASDAQ:NXST), Genesee & Wyoming Inc (NYSE:GWR), Kemper Corporation (NYSE:KMPR), and Stericycle Inc (NASDAQ:SRCL). This group of stocks' market valuations resemble MAN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXST,31,1070646,-3 GWR,22,409479,4 KMPR,8,83442,-7 SRCL,22,560523,3 Average,20.75,531023,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $531 million. That figure was $491 million in MAN's case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 8 bullish hedge fund positions. Manpowergroup Inc (NYSE:MAN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on MAN as the stock returned 7.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.