Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of MDC Partners Inc. (NASDAQ:MDCA).
Is MDC Partners Inc. (NASDAQ:MDCA) a healthy stock for your portfolio? The best stock pickers are getting less bullish. The number of long hedge fund positions dropped by 2 recently. Our calculations also showed that MDCA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). MDCA was in 9 hedge funds' portfolios at the end of March. There were 11 hedge funds in our database with MDCA holdings at the end of the previous quarter. 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a glance at the recent hedge fund action surrounding MDC Partners Inc. (NASDAQ:MDCA).
Hedge fund activity in MDC Partners Inc. (NASDAQ:MDCA)
At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MDCA over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Derek C. Schrier's Indaba Capital Management has the biggest position in MDC Partners Inc. (NASDAQ:MDCA), worth close to $10.4 million, corresponding to 5.6% of its total 13F portfolio. On Indaba Capital Management's heels is Madison Avenue Partners, managed by Eli Samaha, which holds a $3.9 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Jonathan Kolatch's Redwood Capital Management, Renaissance Technologies and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to MDC Partners Inc. (NASDAQ:MDCA), around 5.61% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, earmarking 1.92 percent of its 13F equity portfolio to MDCA.
Judging by the fact that MDC Partners Inc. (NASDAQ:MDCA) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Bradley Louis Radoff's Fondren Management said goodbye to the largest position of the 750 funds watched by Insider Monkey, worth about $0.3 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also cut its stock, about $0.1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as MDC Partners Inc. (NASDAQ:MDCA) but similarly valued. We will take a look at IntriCon Corporation (NASDAQ:IIN), Celyad Oncology SA (NASDAQ:CYAD), Cherry Hill Mortgage Investment Corp (NYSE:CHMI), and OneWater Marine Inc. (NASDAQ:ONEW). All of these stocks' market caps are similar to MDCA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IIN,5,14869,-1 CYAD,1,124,0 CHMI,7,9709,-2 ONEW,6,10723,6 Average,4.75,8856,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $19 million in MDCA's case. Cherry Hill Mortgage Investment Corp (NYSE:CHMI) is the most popular stock in this table. On the other hand Celyad Oncology SA (NASDAQ:CYAD) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks MDC Partners Inc. (NASDAQ:MDCA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately MDCA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MDCA were disappointed as the stock returned -15.2% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.