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Is Mesabi Trust (MSB) Going to Burn These Hedge Funds?

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Asma UL Husna
·6 min read
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We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent 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 funds think of Mesabi Trust (NYSE:MSB) based on that data.

Mesabi Trust (NYSE:MSB) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of September. Our calculations also showed that MSB 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). At the end of this article we will also compare MSB to other stocks including VYNE Therapeutics Inc. (NASDAQ:VYNE), Diamond S Shipping Inc. (NYSE:DSSI), and EZCORP Inc (NASDAQ:EZPW) to get a better sense of its popularity.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT
MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

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 take a glance at the new hedge fund action encompassing Mesabi Trust (NYSE:MSB).

What does smart money think about Mesabi Trust (NYSE:MSB)?

At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MSB over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Horizon Asset Management was the largest shareholder of Mesabi Trust (NYSE:MSB), with a stake worth $24.2 million reported as of the end of September. Trailing Horizon Asset Management was Beddow Capital Management, which amassed a stake valued at $8.7 million. Valueworks LLC, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to Mesabi Trust (NYSE:MSB), around 7.47% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, earmarking 3.48 percent of its 13F equity portfolio to MSB.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Mesabi Trust (NYSE:MSB) but similarly valued. These stocks are VYNE Therapeutics Inc. (NASDAQ:VYNE), Diamond S Shipping Inc. (NYSE:DSSI), EZCORP Inc (NASDAQ:EZPW), Surface Oncology, Inc. (NASDAQ:SURF), Clearfield, Inc. (NASDAQ:CLFD), Independent Bank Corporation (NASDAQ:IBCP), and Xeris Pharmaceuticals, Inc. (NASDAQ:XERS). This group of stocks' market caps match MSB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VYNE,10,54821,-4 DSSI,15,19678,-1 EZPW,15,56333,0 SURF,13,56704,2 CLFD,3,13830,-1 IBCP,13,24898,-1 XERS,13,49164,-7 Average,11.7,39347,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $37 million in MSB's case. Diamond S Shipping Inc. (NYSE:DSSI) is the most popular stock in this table. On the other hand Clearfield, Inc. (NASDAQ:CLFD) is the least popular one with only 3 bullish hedge fund positions. Mesabi Trust (NYSE:MSB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MSB is 30. 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. A small number of hedge funds were also right about betting on MSB as the stock returned 15.3% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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

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