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MVC Capital, Inc. (MVC): Are Hedge Funds Right About This Stock?

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MVC Capital, Inc. (NYSE:MVC) was in 10 hedge funds’ portfolio at the end of March. MVC shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 11 hedge funds in our database with MVC holdings at the end of the previous quarter.

To most shareholders, hedge funds are viewed as underperforming, old financial tools of yesteryear. While there are more than 8000 funds in operation today, we hone in on the crème de la crème of this club, close to 450 funds. Most estimates calculate that this group oversees most of the smart money’s total asset base, and by keeping an eye on their highest performing stock picks, we have revealed a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, positive insider trading sentiment is another way to parse down the marketplace. Obviously, there are many incentives for a corporate insider to downsize shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if piggybackers understand where to look (learn more here).

With these “truths” under our belt, let’s take a peek at the recent action regarding MVC Capital, Inc. (NYSE:MVC).

What have hedge funds been doing with MVC Capital, Inc. (NYSE:MVC)?

At Q1’s end, a total of 10 of the hedge funds we track were long in this stock, a change of -9% from the first quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably.

MVC Capital, Inc. (NYSE:MVC)When looking at the hedgies we track, Nelson Obus’s Wynnefield Capital had the largest position in MVC Capital, Inc. (NYSE:MVC), worth close to $23.9 million, comprising 8.1% of its total 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which held a $14.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Roger Keith Long’s Otter Creek Management, Joseph A. Jolson’s Harvest Capital Strategies and Michael Price’s MFP Investors.

Seeing as MVC Capital, Inc. (NYSE:MVC) has witnessed falling interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that elected to cut their entire stakes at the end of the first quarter. At the top of the heap, William Michaelcheck’s Mariner Investment Group dropped the biggest stake of the “upper crust” of funds we watch, valued at an estimated $0.4 million in stock. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds at the end of the first quarter.

Insider trading activity in MVC Capital, Inc. (NYSE:MVC)

Insider buying is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the latest half-year time period, MVC Capital, Inc. (NYSE:MVC) has seen 4 unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to MVC Capital, Inc. (NYSE:MVC). These stocks are Gladstone Investment Corporation (NASDAQ:GAIN), North European Oil Royalty (NYSE:NRT), KCAP Financial Inc (NASDAQ:KCAP), INTL Fcstone Inc (NASDAQ:INTL), and Mesabi Trust (NYSE:MSB). This group of stocks are in the diversified investments industry and their market caps match MVC’s market cap.

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