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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Marrone Bio Innovations Inc (NASDAQ:MBII) based on those filings.
Is Marrone Bio Innovations (MBII) a good stock to buy now? MBII was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MBII investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 4 hedge funds in our database with MBII holdings at the end of June. Our calculations also showed that MBII 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
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 analyze the fresh hedge fund action surrounding Marrone Bio Innovations Inc (NASDAQ:MBII).
How have hedgies been trading Marrone Bio Innovations Inc (NASDAQ:MBII)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MBII over the last 21 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Marrone Bio Innovations Inc (NASDAQ:MBII) was held by Ardsley Partners, which reported holding $15.6 million worth of stock at the end of September. It was followed by Fairpointe Capital with a $0.7 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Paloma Partners. In terms of the portfolio weights assigned to each position Ardsley Partners allocated the biggest weight to Marrone Bio Innovations Inc (NASDAQ:MBII), around 3.02% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to MBII.
Consequently, key hedge funds were leading the bulls' herd. Renaissance Technologies, initiated the biggest position in Marrone Bio Innovations Inc (NASDAQ:MBII). Renaissance Technologies had $0.1 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also initiated a $0 million position during the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Marrone Bio Innovations Inc (NASDAQ:MBII) but similarly valued. We will take a look at American Outdoor Brands, Inc. (NASDAQ:AOUT), Danaos Corporation (NYSE:DAC), SM Energy Company (NYSE:SM), Rocky Brands, Inc. (NASDAQ:RCKY), SuRo Capital Corp. (NASDAQ:SSSS), Spok Holdings Inc (NASDAQ:SPOK), and Exfo Inc (NASDAQ:EXFO). This group of stocks' market valuations are closest to MBII's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AOUT,10,21964,10 DAC,6,13566,2 SM,15,29654,-3 RCKY,8,13590,1 SSSS,8,8762,2 SPOK,14,20602,2 EXFO,1,3274,0 Average,8.9,15916,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $17 million in MBII's case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Exfo Inc (NASDAQ:EXFO) is the least popular one with only 1 bullish hedge fund positions. Marrone Bio Innovations Inc (NASDAQ:MBII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MBII 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately MBII wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MBII investors were disappointed as the stock returned -3.3% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.