Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Medley Management Inc (NYSE:MDLY) and see how the stock is affected by the recent hedge fund activity.
Medley Management Inc (NYSE:MDLY) has seen a decrease in support from the world's most elite money managers recently. MDLY was in 3 hedge funds' portfolios at the end of September. There were 5 hedge funds in our database with MDLY positions at the end of the previous quarter. Our calculations also showed that MDLY isn't among the 30 most popular stocks among hedge funds.
At the moment there are several metrics stock traders put to use to appraise publicly traded companies. Some of the most innovative metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top fund managers can trounce the S&P 500 by a superb margin (see the details here).
[caption id="attachment_26286" align="aligncenter" width="359"] Jim Simons of Renaissance Technologies[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to go over the key hedge fund action encompassing Medley Management Inc (NYSE:MDLY).
Hedge fund activity in Medley Management Inc (NYSE:MDLY)
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the second quarter of 2019. By comparison, 2 hedge funds held shares or bullish call options in MDLY a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Springhouse Capital Management was the largest shareholder of Medley Management Inc (NYSE:MDLY), with a stake worth $1.4 million reported as of the end of September. Trailing Springhouse Capital Management was Kingstown Capital Management, which amassed a stake valued at $0.9 million. Renaissance Technologies was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Springhouse Capital Management allocated the biggest weight to Medley Management Inc (NYSE:MDLY), around 0.96% of its portfolio. Kingstown Capital Management is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to MDLY.
Because Medley Management Inc (NYSE:MDLY) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of hedge funds that decided to sell off their entire stakes by the end of the third quarter. It's worth mentioning that Jeffrey Hinkle's Shoals Capital Management cut the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $0.1 million in stock. Frederick DiSanto's fund, Ancora Advisors, also sold off its stock, about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Medley Management Inc (NYSE:MDLY) but similarly valued. These stocks are AstroNova, Inc. (NASDAQ:ALOT), EMX Royalty Corporation (NYSE:EMX), Eton Pharmaceuticals, Inc. (NASDAQ:ETON), and Eagle Bancorp Montana Inc (NASDAQ:EBMT). This group of stocks' market valuations are closest to MDLY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALOT,6,14553,-2 EMX,2,7233,0 ETON,3,8860,0 EBMT,3,8924,0 Average,3.5,9893,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $3 million in MDLY's case. AstroNova, Inc. (NASDAQ:ALOT) is the most popular stock in this table. On the other hand EMX Royalty Corporation (NYSE:EMX) is the least popular one with only 2 bullish hedge fund positions. Medley Management Inc (NYSE:MDLY) 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately MDLY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MDLY investors were disappointed as the stock returned -17.7% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.