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Hedge Funds Are Selling Main Street Capital Corporation (MAIN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Main Street Capital Corporation (NYSE:MAIN).

Main Street Capital Corporation (NYSE:MAIN) has experienced a decrease in support from the world’s most elite money managers of late. MAIN was in 7 hedge funds’ portfolios at the end of the first quarter of 2020. There were 9 hedge funds in our database with MAIN positions at the end of the previous quarter. Our calculations also showed that MAIN 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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 we’re going to take a look at the new hedge fund action surrounding Main Street Capital Corporation (NYSE:MAIN).

How have hedgies been trading Main Street Capital Corporation (NYSE:MAIN)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in MAIN over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Main Street Capital Corporation (NYSE:MAIN), worth close to $4.2 million, corresponding to less than 0.1%% of its total 13F portfolio. On Arrowstreet Capital’s heels is McKinley Capital Management, managed by Robert B. Gillam, which holds a $3.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to Main Street Capital Corporation (NYSE:MAIN), around 0.31% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to MAIN.

Because Main Street Capital Corporation (NYSE:MAIN) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers who were dropping their full holdings last quarter. It’s worth mentioning that Mark McMeans’s Brasada Capital Management cut the largest investment of all the hedgies followed by Insider Monkey, totaling about $6.7 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dumped about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Main Street Capital Corporation (NYSE:MAIN). These stocks are Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), Matson Inc. (NYSE:MATX), Fresh Del Monte Produce Inc (NYSE:FDP), and SkyWest, Inc. (NASDAQ:SKYW). This group of stocks’ market caps resemble MAIN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMAB 4 29890 -2
MATX 3 6188 -7
FDP 6 28077 -5
SKYW 18 83716 3
Average 7.75 36968 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $15 million in MAIN’s case. SkyWest, Inc. (NASDAQ:SKYW) is the most popular stock in this table. On the other hand Matson Inc. (NYSE:MATX) is the least popular one with only 3 bullish hedge fund positions. Main Street Capital Corporation (NYSE:MAIN) is not the least popular stock in this group but hedge fund interest is still below average. 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 and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on MAIN as the stock returned 67.1% during the second quarter and outperformed the market by an even larger margin.

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