We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Mercer International Inc. (NASDAQ:MERC) based on that data.
Is MERC a good stock to buy now? Mercer International Inc. (NASDAQ:MERC) has seen an increase in hedge fund sentiment in recent months. Mercer International Inc. (NASDAQ:MERC) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 22. There were 10 hedge funds in our database with MERC positions at the end of the second quarter. Our calculations also showed that MERC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
TUDOR INVESTMENT CORP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to view the recent hedge fund action surrounding Mercer International Inc. (NASDAQ:MERC).
Do Hedge Funds Think MERC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the second quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in MERC a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Is MERC A Good Stock To Buy?
According to Insider Monkey's hedge fund database, Gates Capital Management, managed by Jeffrey Gates, holds the most valuable position in Mercer International Inc. (NASDAQ:MERC). Gates Capital Management has a $42.9 million position in the stock, comprising 1.9% of its 13F portfolio. On Gates Capital Management's heels is Redwood Capital Management, managed by Jonathan Kolatch, which holds a $13.7 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Tom Wagner and Ara Cohen's Knighthead Capital, Israel Englander's Millennium Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Mercer International Inc. (NASDAQ:MERC), around 1.87% of its 13F portfolio. Knighthead Capital is also relatively very bullish on the stock, designating 1.05 percent of its 13F equity portfolio to MERC.
Now, key money managers have been driving this bullishness. Portolan Capital Management, managed by George McCabe, assembled the biggest position in Mercer International Inc. (NASDAQ:MERC). Portolan Capital Management had $2.3 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is David Harding's Winton Capital Management.
Let's now review hedge fund activity in other stocks similar to Mercer International Inc. (NASDAQ:MERC). These stocks are Altimmune, Inc. (NASDAQ:ALT), Cambium Networks Corporation (NASDAQ:CMBM), Byline Bancorp, Inc. (NYSE:BY), McEwen Mining Inc (NYSE:MUX), Establishment Labs Holdings Inc. (NASDAQ:ESTA), QCR Holdings, Inc. (NASDAQ:QCRH), and Avid Bioservices, Inc. (NASDAQ:CDMO). This group of stocks' market caps match MERC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALT,18,144736,6 CMBM,6,4612,4 BY,7,8582,-1 MUX,10,5331,1 ESTA,12,78833,1 QCRH,11,41965,0 CDMO,16,51583,1 Average,11.4,47949,1.7 [/table]
As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $83 million in MERC's case. Altimmune, Inc. (NASDAQ:ALT) is the most popular stock in this table. On the other hand Cambium Networks Corporation (NASDAQ:CMBM) is the least popular one with only 6 bullish hedge fund positions. Mercer International Inc. (NASDAQ:MERC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MERC is 54.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on MERC as the stock returned 48.2% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
