Hedge Funds Aren’t Crazy About Marrone Bio Innovations Inc (MBII) Anymore

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

Is Marrone Bio Innovations Inc (NASDAQ:MBII) an exceptional stock to buy now? The smart money is becoming less confident. The number of long hedge fund bets shrunk by 1 recently. At the end of this article we will also compare MBII to other stocks, including Aptose Biosciences Inc (NASDAQ:APTO), Cytori Therapeutics Inc. (USA) (NASDAQ:CYTX), and Profire Energy, Inc. (NASDAQ:PFIE) to get a better sense of its popularity.

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Today there are a large number of signals market participants employ to assess publicly traded companies. A pair of the less utilized signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best investment managers can beat the S&P 500 by a superb margin (see the details here).

Now, let’s check out the latest action encompassing Marrone Bio Innovations Inc (NASDAQ:MBII).

What have hedge funds been doing with Marrone Bio Innovations Inc (NASDAQ:MBII)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Rima Senvest Management, managed by Richard Mashaal, holds the number one position in Marrone Bio Innovations Inc (NASDAQ:MBII). Rima Senvest Management has an $3.3 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Alyeska Investment Group, led by Anand Parekh, holding an $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions encompass Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Marrone Bio Innovations Inc (NASDAQ:MBII) but similarly valued. We will take a look at Aptose Biosciences Inc (NASDAQ:APTO), Cytori Therapeutics Inc. (USA) (NASDAQ:CYTX), Profire Energy, Inc. (NASDAQ:PFIE), and LeapFrog Enterprises, Inc. (NYSE:LF). This group of stocks’ market caps match MBII’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APTO 6 5295 0
CYTX 4 1254 -2
PFIE 5 2535 0
LF 12 5276 -5

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 $4 million. That figure was also $4 million in MBII’s case. LeapFrog Enterprises, Inc. (NYSE:LF) is the most popular stock in this table, while Cytori Therapeutics Inc. (USA) (NASDAQ:CYTX) is the least popular one with only four bullish hedge fund positions. Compared to these stocks Marrone Bio Innovations Inc (NASDAQ:MBII) is even less popular than CYTX. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to take a closer look at it and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.