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Hedge Funds Are Nibbling On Medley Capital Corp (MCC)

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 Medley Capital Corp (NYSE:MCC) based on that data.

Medley Capital Corp (NYSE:MCC) was in 6 hedge funds’ portfolios at the end of March. MCC investors should be aware of an increase in enthusiasm from smart money recently. There were 5 hedge funds in our database with MCC holdings at the end of the previous quarter. Our calculations also showed that MCC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the recent hedge fund action regarding Medley Capital Corp (NYSE:MCC).

What have hedge funds been doing with Medley Capital Corp (NYSE:MCC)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in MCC a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bradley Louis Radoff’s Fondren Management has the biggest position in Medley Capital Corp (NYSE:MCC), worth close to $0.7 million, corresponding to 1.7% of its total 13F portfolio. The second most bullish fund manager is Roumell Asset Management, managed by Jim Roumell, which holds a $0.6 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Brian Gaines’s Springhouse Capital Management, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to Medley Capital Corp (NYSE:MCC), around 1.72% of its 13F portfolio. Roumell Asset Management is also relatively very bullish on the stock, designating 1.64 percent of its 13F equity portfolio to MCC.

As one would reasonably expect, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Medley Capital Corp (NYSE:MCC). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Medley Capital Corp (NYSE:MCC). These stocks are Ampco-Pittsburgh Corp. (NYSE:AP), Air Industries Group (NYSE:AIRI), Mogo Inc. (NASDAQ:MOGO), and Advaxis, Inc. (NASDAQ:ADXS). This group of stocks’ market valuations match MCC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AP 3 5052 -2
AIRI 1 289 -1
MOGO 2 226 0
ADXS 2 1924 -2
Average 2 1873 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in MCC’s case. Ampco-Pittsburgh Corp. (NYSE:AP) is the most popular stock in this table. On the other hand Air Industries Group (NYSE:AIRI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Medley Capital Corp (NYSE:MCC) 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 gained 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on MCC, though not to the same extent, as the stock returned 25.9% in Q2 (through June 10th) and outperformed the market as well.

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