Hedge Funds Are Warming Up To Minerals Technologies Inc (MTX)

Nina Todic

Sun, Oct 27, 2019, 8:31 PM

How do we determine whether Minerals Technologies Inc (NYSE:MTX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Minerals Technologies Inc (NYSE:MTX) investors should pay attention to an increase in hedge fund sentiment lately. MTX was in 15 hedge funds' portfolios at the end of the second quarter of 2019. There were 14 hedge funds in our database with MTX holdings at the end of the previous quarter. Our calculations also showed that MTX isn't among the 30 most popular stocks among hedge funds (see the video below).

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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the recent hedge fund action surrounding Minerals Technologies Inc (NYSE:MTX).

How have hedgies been trading Minerals Technologies Inc (NYSE:MTX)?

At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in MTX a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Minerals Technologies Inc (NYSE:MTX) was held by Royce & Associates, which reported holding $76.2 million worth of stock at the end of March. It was followed by AQR Capital Management with a $11.6 million position. Other investors bullish on the company included GAMCO Investors, Renaissance Technologies, and D E Shaw.

As one would reasonably expect, key money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Minerals Technologies Inc (NYSE:MTX). Millennium Management had $1.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Charles Paquelet's Skylands Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Minerals Technologies Inc (NYSE:MTX) but similarly valued. These stocks are Veoneer, Inc. (NYSE:VNE), Northwest Bancshares, Inc. (NASDAQ:NWBI), Diodes Incorporated (NASDAQ:DIOD), and Scientific Games Corporation (NASDAQ:SGMS). All of these stocks' market caps match MTX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNE,12,204221,4 NWBI,13,69252,2 DIOD,18,114161,-1 SGMS,27,578766,-1 Average,17.5,241600,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $111 million in MTX's case. Scientific Games Corporation (NASDAQ:SGMS) is the most popular stock in this table. On the other hand Veoneer, Inc. (NYSE:VNE) is the least popular one with only 12 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MTX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MTX investors were disappointed as the stock returned -0.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

Disclosure: None. This article was originally published at Insider Monkey.

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