U.S. Markets closed

Is Medallion Financial Corp. (MFIN) Going to Burn These Hedge Funds?

  • Oops!
    Something went wrong.
    Please try again later.
·6 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Medallion Financial Corp. (NASDAQ:MFIN).

Medallion Financial Corp. (NASDAQ:MFIN) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 10. MFIN investors should be aware of a decrease in support from the world's most elite money managers in recent months. There were 8 hedge funds in our database with MFIN holdings at the end of June. Our calculations also showed that MFIN 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.

If you'd ask most market participants, hedge funds are seen as worthless, old financial tools of years past. While there are over 8000 funds trading today, Our researchers choose to focus on the elite of this club, about 850 funds. These hedge fund managers preside over bulk of the hedge fund industry's total asset base, and by monitoring their inimitable stock picks, Insider Monkey has figured out several investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Mario Gabelli of GAMCO Investors

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 let's take a gander at the new hedge fund action regarding Medallion Financial Corp. (NASDAQ:MFIN).

Hedge fund activity in Medallion Financial Corp. (NASDAQ:MFIN)

Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MFIN over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Alex Lieblong's Key Colony Management has the largest position in Medallion Financial Corp. (NASDAQ:MFIN), worth close to $2.3 million, accounting for 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Mario Gabelli's GAMCO Investors, Steve Pei's Gratia Capital and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Key Colony Management allocated the biggest weight to Medallion Financial Corp. (NASDAQ:MFIN), around 3.73% of its 13F portfolio. Gratia Capital is also relatively very bullish on the stock, dishing out 1.13 percent of its 13F equity portfolio to MFIN.

Since Medallion Financial Corp. (NASDAQ:MFIN) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedge funds who were dropping their positions entirely last quarter. Intriguingly, Donald Sussman's Paloma Partners dropped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, worth close to $0.1 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund sold off about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Medallion Financial Corp. (NASDAQ:MFIN) but similarly valued. We will take a look at Scully Royalty Ltd. (NYSE:SRL), Oramed Pharmaceuticals Inc. (NASDAQ:ORMP), Garrison Capital Inc (NASDAQ:GARS), Guaranty Federal Bancshares, Inc. (NASDAQ:GFED), Forum Energy Technologies Inc (NYSE:FET), Tuanche Limited (NASDAQ:TC), and Great Elm Capital Group, Inc. (NASDAQ:GEC). All of these stocks' market caps are similar to MFIN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRL,2,4086,0 ORMP,7,1819,3 GARS,5,5684,0 GFED,2,1126,0 FET,6,1686,-8 TC,1,11,0 GEC,8,19722,0 Average,4.4,4876,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $4 million in MFIN's case. Great Elm Capital Group, Inc. (NASDAQ:GEC) is the most popular stock in this table. On the other hand Tuanche Limited (NASDAQ:TC) is the least popular one with only 1 bullish hedge fund positions. Medallion Financial Corp. (NASDAQ:MFIN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MFIN is 56.7. 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. 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 still beat the market by 16.1 percentage points. Hedge funds were also right about betting on MFIN as the stock returned 123.6% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Get real-time email alerts: Follow Medallion Financial Corp (NASDAQ:MFIN)

Disclosure: None. This article was originally published at Insider Monkey.

Related Content