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Is MDC Partners Inc. (USA) (MDCA) Going to Burn These Hedge Funds?

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Is MDC Partners Inc. (USA) (NASDAQ:MDCA) a bargain? Money managers are getting more bullish. The number of long hedge fund positions advanced by 1 lately.

MDC Partners Inc. (USA) (NASDAQ:MDCA)

To most traders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds trading at present, we look at the moguls of this group, close to 450 funds. It is estimated that this group has its hands on most of the smart money’s total capital, and by keeping an eye on their best picks, we have uncovered a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (see the details here).

Equally as important, optimistic insider trading activity is a second way to parse down the world of equities. Just as you’d expect, there are a number of motivations for a bullish insider to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this tactic if investors understand where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the latest action surrounding MDC Partners Inc. (USA) (NASDAQ:MDCA).

Hedge fund activity in MDC Partners Inc. (USA) (NASDAQ:MDCA)

Heading into 2013, a total of 8 of the hedge funds we track were bullish in this stock, a change of 14% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, Amy Minella’s Cardinal Capital had the largest position in MDC Partners Inc. (USA) (NASDAQ:MDCA), worth close to $18.4 million, accounting for 1.3% of its total 13F portfolio. The second largest stake is held by Jonathan Kolatch of Redwood Capital Management, with a $5.7 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Leon Cooperman’s Omega Advisors and D. E. Shaw’s D E Shaw.

Now, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the largest position in MDC Partners Inc. (USA) (NASDAQ:MDCA). Millennium Management had 0.4 million invested in the company at the end of the quarter. Ken Brodkowitz and Mike Vermut’s Newland Capital also initiated a $0.2 million position during the quarter.

How have insiders been trading MDC Partners Inc. (USA) (NASDAQ:MDCA)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has seen transactions within the past 180 days. Over the last 180-day time period, MDC Partners Inc. (USA) (NASDAQ:MDCA) has seen 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to MDC Partners Inc. (USA) (NASDAQ:MDCA). These stocks are Valassis Communications, Inc. (NYSE:VCI), National CineMedia, Inc. (NASDAQ:NCMI), Constant Contact Inc (NASDAQ:CTCT), Harte-Hanks, Inc. (NYSE:HHS), and Millennial Media, Inc. (NYSE:MM). All of these stocks are in the marketing services industry and their market caps are closest to MDCA’s market cap.

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