Hedge Funds Are Dumping Martha Stewart Living Omnimedia, Inc. (MSO)

After several tireless days we have finished crunching the numbers from the more than 700 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Martha Stewart Living Omnimedia, Inc. (NYSE:MSO).

Is Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) a first-rate investment today? Investors who are in the know are becoming less hopeful. The number of long hedge fund bets dropped by 6 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Mercantile Bank Corp. (NASDAQ:MBWM), Federated National Holding Co (NASDAQ:FNHC), and Advaxis, Inc. (NASDAQ:ADXS) to gather more data points.

According to most investors, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open at the moment, We look at the leaders of this club, approximately 700 funds. These investment experts watch over most of the smart money’s total asset base, and by watching their inimitable investments, Insider Monkey has figured out various investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, we’re going to review the key action surrounding Martha Stewart Living Omnimedia, Inc. (NYSE:MSO).

How are hedge funds trading Martha Stewart Living Omnimedia, Inc. (NYSE:MSO)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jonathan Salinas’ Plymouth Lane Capital Management has the number one position in Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), worth close to $23.2 million, accounting for 11.9% of its total 13F portfolio. The second largest stake is held by Alpine Associates, led by Robert Emil Zoellner, holding an $9 million position; 0.4% of its 13F portfolio is allocated to the stock. Other peers that are bullish encompass Noam Gottesman’s GLG Partners, Jim Simons’s Renaissance Technologies and D. E. Shaw’s D E Shaw.

Because Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) has experienced falling interest from the smart money, we can see that there was a specific group of money managers that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, John Orrico’s Water Island Capital dropped the largest stake of the 700 funds watched by Insider Monkey, valued at about $2.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.7 million worth of shares. These transactions are important to note, as total hedge fund interest dropped by 6 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Martha Stewart Living Omnimedia, Inc. (NYSE:MSO). These stocks are Mercantile Bank Corp. (NASDAQ:MBWM), Federated National Holding Co (NASDAQ:FNHC), Advaxis, Inc. (NASDAQ:ADXS), and IDT Corporation (NYSE:IDT). All of these stocks’ market caps are closest to MSO’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $60 million, slightly higher than the $43 million in MSO’s case. Advaxis, Inc. (NASDAQ:ADXS) is the most popular stock in this table. On the other hand, Mercantile Bank Corp. (NASDAQ:MBWM) is the least popular one with only 5 bullish hedge fund positions. Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ADXS might be a better candidate to consider a long position.