Man Group's [EMG] share price has dived 24.6% this year. While the stock may have recovered somewhat since mid-March, the first six months of the year have not been kind to the hedge fund. During this time, assets under management fell from $117.7bn at the end of December to $108.3bn. Worse still was adjusted profit before tax coming in at $94m, a 40% drop from the $157m seen in the first half of last year.
To restore investor confidence and Man Group’s share price, the fund needs to show it can make the right investment choices, which makes its 13F filing a must-read. Interestingly, the filing sees Man Group not only continue to buy into tech stocks, but also bet big on the future of the US banking and retail sectors.
For investors, it's worth asking whether the fund is simply following trends post-lockdown, or if this is a long-term strategy worth adopting that will boost Man Group’s share price going forwards.
What has Man Group been buying last quarter?
Lockdown has seen a boom in people spending on their houses. Nowhere is this more evident than in US home improvement giant Lowe's [LOW] second-quarter results. Sales shot up to $27.3bn in the quarter compared to the $21bn seen in the same period last year. Earnings saw even better growth, with diluted earnings per share coming in at $3.75, a whopping 74% increase.
Man Group seems to be betting that the home improvement trend will continue a little longer. Lowe's was its top pick for the second quarter, with Man Group scooping up an additional 1,648,996 shares in the company.
Since the height of the pandemic, Lowe's share price has climbed over 145%, and analysts reckon there are more gains to be had. On Yahoo Finance, the stock carries an average $181.50 price target, which would see a 14% upside on Lowe’s share price through 9 September’s close.
Lowe's share price rise since March low
Man Group is big on tech companies. Alibaba [BABA], Amazon [AMZN], Apple [AAPL] and Facebook [FB] are all in its top 5 holdings. But in the number one spot is Microsoft [MSFT], representing 3.4% of Man Group’s portfolio. In the second quarter, Man Group picked up an extra 699,981 shares, taking its position in Microsoft to $674.15m.
Microsoft's share price has had a strong 2020. Up over 35% this year, the stock has benefited from the shift to cloud technology and a diversified business. Over a two-year period, the gains are even more pronounced, with Microsoft's share price up over 97%. With an average 12-month price target of $228.22, there could still be more growth left in the stock.
Microsoft's YTD share price rise
3. Bristol-Myers Squibb Co
Pharmaceutical company Bristol-Myers Squibb Co [BMY] is currently a hedge fund darling. According to Insider Monkey, in the second quarter 136 hedge funds were bullish on the stock, up from 65 the same time last year. Not to be left out, Man Group picked up 2,427,666 shares in the second quarter.
Man Group and other hedge funds seem optimistic that BMY's share price can recover from losses sustained this year. These come despite strong revenues of $10.12bn in the second quarter, a huge 61% jump from the same period a year ago. Among the analysts tracking the stock on Yahoo Finance, BMY's share price carries an average $73.25 price target. Hitting this would see a 24% upside on the current price (as of 9 September’s close).
Bristol-Myers Squibb Co's Q2 revenue - a 61% YoY rise
4. Bank of New York Mellon
Man Group is betting that US banking stocks are going to bounce back having taken a pummelling so far this year. In the second quarter, the asset manager picked up 2,783,938 shares in Bank of New York Mellon [BK], which has seen its share price drop over 25% this year. Man Group also upped its holdings in Citigroup, picking up an extra 450,813 shares. Like BNY Mellon, Citigroup's share price has had a shocker, slumping a massive 33% this year.
However, analysts seem confident in a turnaround in both banks’ fortunes. Among those tracking the stock on Yahoo Finance, BNY Mellon has a $44.38 price target, which would see a 23.7% upside on the current share price through 9 September, while Citi has a $69.21 target, representing a potential 35% gain. If either bank hits these targets, it will be good news for Man Group.
5. Dollar General Corp
Discount US retailer Dollar General Corp’s [DG] share price has experienced a decent gain of circa 25% so far this year. In the second quarter, the retailer saw net sales grow 24.4%, while operating profit increased by 80.4% to $1bn. Driving this growth is an increase in consumers spending more on lower priced household items.
Dollar General Corp's YTD share price rise
Man Group seems to be hoping that this trend continues, picking up 516,031 shares in the second quarter, a 141% quarter-on-quarter increase on its holdings in the retailer. Analysts have pinned an average $222.36 price target on the stock, which would see a 12.6% upside on the current share price through 9 September’s close