While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding MBIA Inc. (NYSE:MBI).
Is MBIA Inc. (NYSE:MBI) going to take off soon? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions advanced by 4 in recent months. Our calculations also showed that MBI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MBI was in 22 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with MBI holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are seen as unimportant, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open at present, Our experts choose to focus on the moguls of this group, around 750 funds. These money managers administer most of the smart money's total asset base, and by following their first-class picks, Insider Monkey has spotted numerous investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26262" align="aligncenter" width="359"] Steven Cohen of Point72 Asset Management[/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 take a look at the fresh hedge fund action surrounding MBIA Inc. (NYSE:MBI).
Hedge fund activity in MBIA Inc. (NYSE:MBI)
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in MBI a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Debra Fine's Fine Capital Partners has the largest position in MBIA Inc. (NYSE:MBI), worth close to $52.1 million, corresponding to 11.8% of its total 13F portfolio. The second most bullish fund manager is Kahn Brothers, holding a $51.5 million position; the fund has 6.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Emanuel J. Friedman's EJF Capital, David Rosen's Rubric Capital Management and Charles Lemonides's Valueworks LLC. In terms of the portfolio weights assigned to each position Fine Capital Partners allocated the biggest weight to MBIA Inc. (NYSE:MBI), around 11.76% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 6.47 percent of its 13F equity portfolio to MBI.
As one would reasonably expect, key money managers have jumped into MBIA Inc. (NYSE:MBI) headfirst. EJF Capital, managed by Emanuel J. Friedman, established the largest position in MBIA Inc. (NYSE:MBI). EJF Capital had $15.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, David Harding's Winton Capital Management, and Steve Cohen's Point72 Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as MBIA Inc. (NYSE:MBI) but similarly valued. We will take a look at Pitney Bowes Inc. (NYSE:PBI), Northern Oil & Gas, Inc. (NYSE:NOG), Lakeland Bancorp, Inc. (NASDAQ:LBAI), and Benefitfocus Inc (NASDAQ:BNFT). This group of stocks' market valuations resemble MBI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PBI,19,73062,1 NOG,19,135625,0 LBAI,12,34546,1 BNFT,14,30746,-1 Average,16,68495,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $178 million in MBI's case. Pitney Bowes Inc. (NYSE:PBI) is the most popular stock in this table. On the other hand Lakeland Bancorp, Inc. (NASDAQ:LBAI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks MBIA Inc. (NYSE:MBI) 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. Unfortunately MBI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MBI were disappointed as the stock returned 1.1% during the first two months of the fourth quarter 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.