Hedge Funds Are Betting On Mercantile Bank Corporation (MBWM)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Mercantile Bank Corporation (NASDAQ:MBWM).

Mercantile Bank Corporation (NASDAQ:MBWM) has seen an increase in activity from the world’s largest hedge funds of late. MBWM was in 8 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with MBWM positions at the end of the previous quarter. Our calculations also showed that MBWM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are numerous signals stock traders can use to value publicly traded companies. A pair of the less known signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top fund managers can outclass the broader indices by a healthy amount (see the details here).

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the new hedge fund action encompassing Mercantile Bank Corporation (NASDAQ:MBWM).

How are hedge funds trading Mercantile Bank Corporation (NASDAQ:MBWM)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in MBWM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mercantile Bank Corporation (NASDAQ:MBWM) was held by Renaissance Technologies, which reported holding $27.2 million worth of stock at the end of September. It was followed by Millennium Management with a $0.9 million position. Other investors bullish on the company included Arrowstreet Capital, Winton Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Mercantile Bank Corporation (NASDAQ:MBWM), around 0.02% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to MBWM.

Now, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Mercantile Bank Corporation (NASDAQ:MBWM). Citadel Investment Group had $0.5 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.2 million investment in the stock during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Mercantile Bank Corporation (NASDAQ:MBWM). We will take a look at Crossamerica Partners LP (NYSE:CAPL), Global Cord Blood Corporation (NYSE:CO), Bridge Bancorp, Inc. (NASDAQ:BDGE), and Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). This group of stocks’ market values are similar to MBWM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAPL 1 4401 0
CO 11 29108 2
BDGE 10 95163 0
RCKT 13 137987 -1
Average 8.75 66665 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $31 million in MBWM’s case. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. Mercantile Bank Corporation (NASDAQ:MBWM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MBWM, though not to the same extent, as the stock returned 7.5% during the first two months of the fourth quarter and outperformed the market.

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