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Hedge Funds Are Selling Midland States Bancorp, Inc. (MSBI)

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Midland States Bancorp, Inc. (NASDAQ:MSBI).

Is Midland States Bancorp, Inc. (NASDAQ:MSBI) a good investment now? The best stock pickers are reducing their bets on the stock. The number of long hedge fund bets retreated by 1 lately. Our calculations also showed that MSBI 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). MSBI was in 8 hedge funds’ portfolios at the end of the first quarter of 2020. There were 9 hedge funds in our database with MSBI holdings at the end of the previous quarter.

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

To the average investor there are many formulas investors use to evaluate publicly traded companies. Two of the most under-the-radar formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outperform the broader indices by a healthy margin (see the details here).

David Harding

David Harding of Winton Capital Management

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. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding Midland States Bancorp, Inc. (NASDAQ:MSBI).

How are hedge funds trading Midland States Bancorp, Inc. (NASDAQ:MSBI)?

At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MSBI over the last 18 quarters. 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 Midland States Bancorp, Inc. (NASDAQ:MSBI) was held by AQR Capital Management, which reported holding $1.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.9 million position. Other investors bullish on the company included Winton Capital Management, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Midland States Bancorp, Inc. (NASDAQ:MSBI), around 0.59% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to MSBI.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. 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 MSBI as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Midland States Bancorp, Inc. (NASDAQ:MSBI). We will take a look at Boston Omaha Corporation (NASDAQ:BOMN), CEL-SCI Corporation (NYSE:CVM), Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA), and PBF Logistics LP (NYSE:PBFX). This group of stocks’ market values are similar to MSBI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BOMN 5 185342 0
CVM 5 10816 0
LOMA 12 30637 5
PBFX 3 870 0
Average 6.25 56916 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $6 million in MSBI’s case. Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 3 bullish hedge fund positions. Midland States Bancorp, Inc. (NASDAQ:MSBI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately MSBI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MSBI were disappointed as the stock returned -14.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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