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In this article we will take a look at whether hedge funds think Macatawa Bank Corporation (NASDAQ:MCBC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Macatawa Bank Corporation (NASDAQ:MCBC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of September. Our calculations also showed that MCBC 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 MCBC to other stocks including Park Aerospace Corp. (NYSE:PKE), Entercom Communications Corp. (NYSE:ETM), and Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) 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.
Fred Cummings of Elizabeth Park Capital
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. Keeping this in mind let's take a glance at the recent hedge fund action regarding Macatawa Bank Corporation (NASDAQ:MCBC).
Do Hedge Funds Think MCBC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MCBC over the last 21 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Macatawa Bank Corporation (NASDAQ:MCBC), which was worth $8.5 million at the end of the third quarter. On the second spot was Elizabeth Park Capital Management which amassed $5.6 million worth of shares. Zebra Capital Management, Two Sigma Advisors, and Arrowstreet Capital 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 Elizabeth Park Capital Management allocated the biggest weight to Macatawa Bank Corporation (NASDAQ:MCBC), around 3.66% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 1.16 percent of its 13F equity portfolio to MCBC.
Since Macatawa Bank Corporation (NASDAQ:MCBC) has faced falling interest from the smart money, it's safe to say that there were a few fund managers who were dropping their entire stakes last quarter. At the top of the heap, Thomas Bailard's Bailard Inc sold off the biggest stake of the 750 funds watched by Insider Monkey, totaling close to $0.2 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund dumped about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Macatawa Bank Corporation (NASDAQ:MCBC). We will take a look at Park Aerospace Corp. (NYSE:PKE), Entercom Communications Corp. (NYSE:ETM), Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), EMX Royalty Corporation (NYSE:EMX), Old Second Bancorp Inc. (NASDAQ:OSBC), U.S. Silica Holdings Inc (NYSE:SLCA), and Fly Leasing Ltd (NYSE:FLY). This group of stocks' market valuations resemble MCBC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PKE,12,37961,2 ETM,17,13721,-1 NGVC,13,24830,1 EMX,3,9203,1 OSBC,10,12116,-2 SLCA,16,57788,0 FLY,7,12567,-3 Average,11.1,24027,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $17 million in MCBC's case. Entercom Communications Corp. (NYSE:ETM) is the most popular stock in this table. On the other hand EMX Royalty Corporation (NYSE:EMX) is the least popular one with only 3 bullish hedge fund positions. Macatawa Bank Corporation (NASDAQ:MCBC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MCBC is 53.4. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on MCBC as the stock returned 26.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.