Is Mesa Laboratories, Inc. (MLAB) A Good Stock To Buy?

Reymerlyn Martin

Sat, May 4, 2019, 7:42 PM

"Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Mesa Laboratories, Inc. (NASDAQ:MLAB) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Mesa Laboratories, Inc. (NASDAQ:MLAB) investors should be aware of a decrease in support from the world's most elite money managers lately. MLAB was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 10 hedge funds in our database with MLAB positions at the end of the previous quarter. Our calculations also showed that MLAB isn't among the 30 most popular stocks among hedge funds.

In the eyes of most stock holders, hedge funds are assumed to be worthless, outdated investment tools of years past. While there are over 8000 funds trading at present, We hone in on the masters of this club, approximately 750 funds. These money managers preside over most of the hedge fund industry's total capital, and by paying attention to their finest equity investments, Insider Monkey has found numerous investment strategies that have historically outstripped the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

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Let's analyze the new hedge fund action encompassing Mesa Laboratories, Inc. (NASDAQ:MLAB).

How have hedgies been trading Mesa Laboratories, Inc. (NASDAQ:MLAB)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in MLAB a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in Mesa Laboratories, Inc. (NASDAQ:MLAB), which was worth $23.1 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $13 million worth of shares. Moreover, Nine Ten Partners, Millennium Management, and Citadel Investment Group were also bullish on Mesa Laboratories, Inc. (NASDAQ:MLAB), allocating a large percentage of their portfolios to this stock.

Since Mesa Laboratories, Inc. (NASDAQ:MLAB) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that slashed their entire stakes in the third quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $1.7 million in stock, and Joel Greenblatt's Gotham Asset Management was right behind this move, as the fund dumped about $0.5 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to Mesa Laboratories, Inc. (NASDAQ:MLAB). We will take a look at Seabridge Gold, Inc. (NYSE:SA), Helix Energy Solutions Group Inc. (NYSE:HLX), QuinStreet Inc (NASDAQ:QNST), and The St. Joe Company (NYSE:JOE). This group of stocks' market values are similar to MLAB's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SA,8,43195,1 HLX,18,34360,2 QNST,27,233274,-1 JOE,12,383512,-3 Average,16.25,173585,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $48 million in MLAB's case. QuinStreet Inc (NASDAQ:QNST) is the most popular stock in this table. On the other hand Seabridge Gold, Inc. (NYSE:SA) is the least popular one with only 8 bullish hedge fund positions. Mesa Laboratories, Inc. (NASDAQ:MLAB) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MLAB wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); MLAB investors were disappointed as the stock returned 5.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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