The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value 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 investors think of Marchex, Inc. (NASDAQ:MCHX).
Hedge fund interest in Marchex, Inc. (NASDAQ:MCHX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Capitala Finance Corp (NASDAQ:CPTA), Atlanticus Holdings Corp (NASDAQ:ATLC), and Fonar Corporation (NASDAQ:FONR) to gather more data points. Our calculations also showed that MCHX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to view the key hedge fund action surrounding Marchex, Inc. (NASDAQ:MCHX).
How have hedgies been trading Marchex, Inc. (NASDAQ:MCHX)?
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MCHX over the last 17 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Marchex, Inc. (NASDAQ:MCHX) was held by Renaissance Technologies, which reported holding $7.9 million worth of stock at the end of September. It was followed by Harbert Management with a $3.3 million position. Other investors bullish on the company included P.A.W. Capital Partners, Royce & Associates, and Ancora Advisors. In terms of the portfolio weights assigned to each position Harbert Management allocated the biggest weight to Marchex, Inc. (NASDAQ:MCHX), around 4.85% of its 13F portfolio. P.A.W. Capital Partners is also relatively very bullish on the stock, setting aside 3.92 percent of its 13F equity portfolio to MCHX.
Because Marchex, Inc. (NASDAQ:MCHX) has experienced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedge funds who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Mark Broach's Manatuck Hill Partners cut the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $1.1 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also said goodbye to its stock, about $0.1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Marchex, Inc. (NASDAQ:MCHX). These stocks are Capitala Finance Corp (NASDAQ:CPTA), Atlanticus Holdings Corp (NASDAQ:ATLC), Fonar Corporation (NASDAQ:FONR), and Acacia Research Corporation (NASDAQ:ACTG). This group of stocks' market valuations resemble MCHX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPTA,2,1591,-1 ATLC,2,3385,0 FONR,9,14081,1 ACTG,12,20237,1 Average,6.25,9824,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $21 million in MCHX's case. Acacia Research Corporation (NASDAQ:ACTG) is the most popular stock in this table. On the other hand Capitala Finance Corp (NASDAQ:CPTA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Marchex, Inc. (NASDAQ:MCHX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MCHX as the stock returned 28% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.