Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Myers Industries, Inc. (NYSE:MYE).
Myers Industries, Inc. (NYSE:MYE) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that MYE 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 analyze the key hedge fund action regarding Myers Industries, Inc. (NYSE:MYE).
How are hedge funds trading Myers Industries, Inc. (NYSE:MYE)?
At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 75% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in MYE a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Myers Industries, Inc. (NYSE:MYE), with a stake worth $72.7 million reported as of the end of March. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $15.6 million. Wallace R. Weitz & Co., Arrowstreet Capital, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Myers Industries, Inc. (NYSE:MYE). Arrowstreet Capital had $1.7 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new MYE investors: Israel Englander’s Millennium Management, Noam Gottesman’s GLG Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks similar to Myers Industries, Inc. (NYSE:MYE). We will take a look at Cresud S.A.C.I.F. y A. (NASDAQ:CRESY), First Foundation Inc (NASDAQ:FFWM), Niu Technologies (NASDAQ:NIU), and Fang Holdings Limited (NYSE:SFUN). All of these stocks’ market caps are closest to MYE’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRESY,7,28912,0 FFWM,11,77117,0 NIU,2,29270,-1 SFUN,8,1786,-1 Average,7,34271,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $97 million in MYE’s case. First Foundation Inc (NASDAQ:FFWM) is the most popular stock in this table. On the other hand Niu Technologies (NASDAQ:NIU) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Myers Industries, Inc. (NYSE:MYE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on MYE as the stock returned 8.9% during the same period 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.
Disclosure: None. This article was originally published at Insider Monkey.
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