Hedge funds are known to underperform the bull markets but that’s not because they are terrible at stock picking. Hedge funds underperform because their net exposure in only 40-70% and they charge exorbitant fees. No one knows what the future holds and how market participants will react to the bountiful news that floods in each day. However, hedge funds’ consensus picks on average deliver market beating returns. For example the Standard and Poor’s 500 Total Return Index ETFs returned 27.5% (including dividend payments) through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of nearly 37.4% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Interestingly, an average long/short hedge fund returned only a fraction of this value due to the hedges they implemented and the large fees they charged. If you pay attention to the actual hedge fund returns versus the returns of their long stock picks, you might believe that it is a waste of time to analyze hedge funds’ purchases. We know better. That’s why we scrutinize hedge fund sentiment before we invest in a stock like Malvern Bancorp, Inc. (NASDAQ:MLVF).
Malvern Bancorp, Inc. (NASDAQ:MLVF) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as IntriCon Corporation (NASDAQ:IIN), Auburn National Bancorporation, Inc. (NASDAQ:AUBN), and Gencor Industries, Inc. (DE) (NASDAQ:GENC) to gather more data points. Our calculations also showed that MLVF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are tons of signals stock traders can use to grade stocks. Two of the most under-the-radar signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top money managers can beat their index-focused peers by a very impressive margin (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to analyze the key hedge fund action regarding Malvern Bancorp, Inc. (NASDAQ:MLVF).
Hedge fund activity in Malvern Bancorp, Inc. (NASDAQ:MLVF)
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MLVF over the last 17 quarters. So, let’s see 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, Lawrence Seidman’s Seidman Investment Partnership has the largest position in Malvern Bancorp, Inc. (NASDAQ:MLVF), worth close to $15.4 million, accounting for 14% of its total 13F portfolio. On Seidman Investment Partnership’s heels is EJF Capital, led by Emanuel J. Friedman, holding a $14 million position; 1.9% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Renaissance Technologies, David P. Cohen’s Minerva Advisors and . In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Malvern Bancorp, Inc. (NASDAQ:MLVF), around 13.99% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 1.9 percent of its 13F equity portfolio to MLVF.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Malvern Bancorp, Inc. (NASDAQ:MLVF) but similarly valued. We will take a look at IntriCon Corporation (NASDAQ:IIN), Auburn National Bancorporation, Inc. (NASDAQ:AUBN), Gencor Industries, Inc. (DE) (NASDAQ:GENC), and Natural Gas Services Group, Inc. (NYSE:NGS). This group of stocks’ market values match MLVF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IIN | 9 | 23467 | 2 |
| AUBN | 2 | 708 | -1 |
| GENC | 4 | 23922 | 1 |
| NGS | 10 | 16323 | 3 |
| Average | 6.25 | 16105 | 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 $16 million. That figure was $32 million in MLVF’s case. Natural Gas Services Group, Inc. (NYSE:NGS) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 2 bullish hedge fund positions. Malvern Bancorp, Inc. (NASDAQ:MLVF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MLVF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MLVF investors were disappointed as the stock returned 5.2% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
