Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Capital Southwest Corporation (NASDAQ:CSWC).
Capital Southwest Corporation (NASDAQ:CSWC) was in 11 hedge funds’ portfolios at the end of September. Capital Southwest Corporation (NASDAQ:CSWC) investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 14 hedge funds in our database with Capital Southwest Corporation (NASDAQ:CSWC) holdings at the end of the previous quarter. At the end of this article, we will also compare Capital Southwest Corporation (NASDAQ:CSWC) to other stocks including Capital Product Partners L.P. (NASDAQ:CPLP), Sun Hydraulics Corporation (NASDAQ:SNHY), and 8×8, Inc. (NASDAQ:EGHT) to get a better sense of its popularity.
To most investors, hedge funds are assumed to be underperforming, old financial tools of the past. While there are more than 8000 funds trading today, our researchers hone in on the aristocrats of this club, approximately 700 funds. It is estimated that this group of investors directs the lion’s share of the hedge fund industry’s total asset base, and by watching their unrivaled picks, Insider Monkey has revealed various investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped 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 go over the latest action surrounding Capital Southwest Corporation (NASDAQ:CSWC).
What have hedge funds been doing with Capital Southwest Corporation (NASDAQ:CSWC)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 21% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Moab Capital Partners, managed by Michael M. Rothenberg and David Sackler, holds the number one position in Capital Southwest Corporation (NASDAQ:CSWC). Moab Capital Partners has a $69.6 million position in the stock, comprising 24.5% of its 13F portfolio. Sitting at the No. 2 spot is Iszo Capital, led by Brian Sheehy, holding a $24.1 million position; 13.7% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish comprise Jonathan Savitz’s Greywolf Capital Management, Noah Levy and Eugene Dozortsev’s Newtyn Management and Martin Whitman’s Third Avenue Management.