In this article we will check out the progression of hedge fund sentiment towards Malibu Boats Inc (NASDAQ:MBUU) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Malibu Boats Inc (NASDAQ:MBUU) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare MBUU to other stocks including Meridian Bancorp, Inc. (NASDAQ:EBSB), Herc Holdings Inc. (NYSE:HRI), and ImmunoGen, Inc. (NASDAQ:IMGN) to get a better sense of its popularity.
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. With all of this in mind we're going to analyze the fresh hedge fund action encompassing Malibu Boats Inc (NASDAQ:MBUU).
Hedge fund activity in Malibu Boats Inc (NASDAQ:MBUU)
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in MBUU 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.
The largest stake in Malibu Boats Inc (NASDAQ:MBUU) was held by Renaissance Technologies, which reported holding $40.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $9.4 million position. Other investors bullish on the company included Shellback Capital, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Shellback Capital allocated the biggest weight to Malibu Boats Inc (NASDAQ:MBUU), around 1.61% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, designating 0.73 percent of its 13F equity portfolio to MBUU.
Seeing as Malibu Boats Inc (NASDAQ:MBUU) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds that decided to sell off their full holdings by the end of the first quarter. Interestingly, Paul Tudor Jones's Tudor Investment Corp said goodbye to the biggest position of the "upper crust" of funds tracked by Insider Monkey, worth about $1.2 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund sold off about $0.4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Malibu Boats Inc (NASDAQ:MBUU) but similarly valued. These stocks are Meridian Bancorp, Inc. (NASDAQ:EBSB), Herc Holdings Inc. (NYSE:HRI), ImmunoGen, Inc. (NASDAQ:IMGN), and Columbus McKinnon Corporation (NASDAQ:CMCO). This group of stocks' market caps are similar to MBUU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBSB,12,55305,0 HRI,17,232260,-4 IMGN,19,150998,1 CMCO,16,28308,-3 Average,16,116718,-1.5 [/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 $117 million. That figure was $72 million in MBUU's case. ImmunoGen, Inc. (NASDAQ:IMGN) is the most popular stock in this table. On the other hand Meridian Bancorp, Inc. (NASDAQ:EBSB) is the least popular one with only 12 bullish hedge fund positions. Malibu Boats Inc (NASDAQ:MBUU) 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 and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on MBUU as the stock returned 73.9% during the second quarter and outperformed the market by an even larger margin.
