Do Hedge Funds Love MVC Capital, Inc. (MVC)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of MVC Capital, Inc. (NYSE:MVC) based on that data.

Hedge fund interest in MVC Capital, Inc. (NYSE:MVC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MVC to other stocks including BiondVax Pharmaceuticals Ltd. (NASDAQ:BVXV), USD Partners LP (NYSE:USDP), and BG Staffing Inc (NYSE:BGSF) 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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nelson Obus of Wynnefield Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action regarding MVC Capital, Inc. (NYSE:MVC).

How have hedgies been trading MVC Capital, Inc. (NYSE:MVC)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in MVC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Omega Advisors held the most valuable stake in MVC Capital, Inc. (NYSE:MVC), which was worth $7.6 million at the end of the third quarter. On the second spot was Wynnefield Capital which amassed $6.6 million worth of shares. Almitas Capital, Royce & Associates, and Bulldog Investors 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 Wynnefield Capital allocated the biggest weight to MVC Capital, Inc. (NYSE:MVC), around 6.28% of its 13F portfolio. Almitas Capital is also relatively very bullish on the stock, dishing out 5.17 percent of its 13F equity portfolio to MVC.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MVC Capital, Inc. (NYSE:MVC) but similarly valued. We will take a look at BiondVax Pharmaceuticals Ltd. (NASDAQ:BVXV), USD Partners LP (NYSE:USDP), BG Staffing Inc (NYSE:BGSF), and Orion Group Holdings, Inc. (NYSE:ORN). This group of stocks’ market values are similar to MVC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BVXV 1 163 0
USDP 2 485 0
BGSF 6 3047 -2
ORN 7 5908 -6
Average 4 2401 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $21 million in MVC’s case. Orion Group Holdings, Inc. (NYSE:ORN) is the most popular stock in this table. On the other hand BiondVax Pharmaceuticals Ltd. (NASDAQ:BVXV) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks MVC Capital, Inc. (NYSE:MVC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on MVC as the stock returned 55.6% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.