Is MainStreet Bancshares, Inc. (NASDAQ:MNSB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
MainStreet Bancshares, Inc. (NASDAQ:MNSB) has experienced a decrease in hedge fund sentiment lately. Our calculations also showed that MNSB isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Wall Street Bull
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the fresh hedge fund action encompassing MainStreet Bancshares, Inc. (NASDAQ:MNSB).
Hedge fund activity in MainStreet Bancshares, Inc. (NASDAQ:MNSB)
At Q3’s end, a total of 2 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MNSB over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, EJF Capital held the most valuable stake in MainStreet Bancshares, Inc. (NASDAQ:MNSB), which was worth $8.5 million at the end of the third quarter. On the second spot was Castine Capital Management which amassed $4.5 million worth of shares.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Seidman Investment Partnership. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified MNSB as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MainStreet Bancshares, Inc. (NASDAQ:MNSB) but similarly valued. We will take a look at Silvercrest Asset Management Group Inc (NASDAQ:SAMG), XOMA Corp (NASDAQ:XOMA), J Alexander’s Holdings Inc (NYSE:JAX), and Enzo Biochem, Inc. (NYSE:ENZ). All of these stocks’ market caps match MNSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAMG | 4 | 12825 | 1 |
| XOMA | 5 | 43538 | -2 |
| JAX | 9 | 29019 | -2 |
| ENZ | 10 | 38824 | 0 |
| Average | 7 | 31052 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $13 million in MNSB’s case. Enzo Biochem, Inc. (NYSE:ENZ) is the most popular stock in this table. On the other hand Silvercrest Asset Management Group Inc (NASDAQ:SAMG) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks MainStreet Bancshares, Inc. (NASDAQ:MNSB) is even less popular than SAMG. Hedge funds dodged a bullet by taking a bearish stance towards MNSB. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately MNSB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MNSB investors were disappointed as the stock returned 3.4% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.