Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about MVC Capital, Inc. (NYSE:MVC).
Hedge fund interest in MVC Capital, Inc. (NYSE:MVC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MVC to other stocks including SunOpta, Inc. (NASDAQ:STKL), Olympic Steel, Inc. (NASDAQ:ZEUS), and Vitamin Shoppe Inc (NYSE:VSI) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are tons of methods shareholders put to use to assess publicly traded companies. Two of the most useful methods are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a superb amount (see the details here).
[caption id="attachment_26283" align="alignnone" width="600"] Leon Cooperman of Omega Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to review the fresh hedge fund action regarding MVC Capital, Inc. (NYSE:MVC).
What have hedge funds been doing with MVC Capital, Inc. (NYSE:MVC)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MVC over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Leon Cooperman's Omega Advisors has the biggest position in MVC Capital, Inc. (NYSE:MVC), worth close to $15.2 million, accounting for 0.9% of its total 13F portfolio. The second most bullish fund manager is Wynnefield Capital, led by Nelson Obus, holding a $13.5 million position; the fund has 7.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Chuck Royce's Royce & Associates, Ron Mass's Almitas Capital and Phillip Goldstein, Andrew Dakos and Steven Samuels's Bulldog Investors. In terms of the portfolio weights assigned to each position Wynnefield Capital allocated the biggest weight to MVC Capital, Inc. (NYSE:MVC), around 7.17% of its 13F portfolio. Almitas Capital is also relatively very bullish on the stock, dishing out 6.14 percent of its 13F equity portfolio to MVC.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as MVC Capital, Inc. (NYSE:MVC) but similarly valued. These stocks are SunOpta, Inc. (NASDAQ:STKL), Olympic Steel, Inc. (NASDAQ:ZEUS), Vitamin Shoppe Inc (NYSE:VSI), and Marrone Bio Innovations Inc (NASDAQ:MBII). This group of stocks' market valuations are closest to MVC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STKL,13,62722,-1 ZEUS,7,3501,-2 VSI,12,38820,1 MBII,2,14993,-1 Average,8.5,30009,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $46 million in MVC's case. SunOpta, Inc. (NASDAQ:STKL) is the most popular stock in this table. On the other hand Marrone Bio Innovations Inc (NASDAQ:MBII) is the least popular one with only 2 bullish hedge fund positions. MVC Capital, Inc. (NYSE:MVC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MVC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MVC were disappointed as the stock returned 4.5% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.