Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Mercantile Bank Corp. (NASDAQ:MBWM), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Hedge fund interest in Mercantile Bank Corp. (NASDAQ:MBWM) shares was flat at the end of last quarter. This is usually a negative indicator. While considering the activity in its stock throughout the quarter, it had a similar movement, dropping only 2.94%. For a better understanding of the overall hedge fund behavior, we will cover hedge funds that were holding positions in Mercantile Bank Corp. (NASDAQ:MBWM) at the end of September.
Hedge fund activity in stocks with similar market caps is one of the ways to understand hedge fund behavior. Keeping that in mind, we will also compare Mercantile Bank Corp. (NASDAQ:MBWM) to other stocks, including Federated National Holding Co (NASDAQ:FNHC), Advaxis, Inc. (NASDAQ:ADXS), and IDT Corporation (NYSE:IDT) to get a better sense of its popularity.
Follow Mercantile Bank Corp (NASDAQ:MBWM)
Follow Mercantile Bank Corp (NASDAQ:MBWM)
At the moment there are a lot of tools market participants can use to value stocks. A couple of the best tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite money managers can beat the S&P 500 by a solid amount (see the details here).
Keeping this in mind, let’s take a look at the recent action regarding Mercantile Bank Corp. (NASDAQ:MBWM).
How are hedge funds trading Mercantile Bank Corp. (NASDAQ:MBWM)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the second quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in Mercantile Bank Corp. (NASDAQ:MBWM), worth close to $12.8 million, accounting for less than 0.1% of its total 13F portfolio. The second largest stake is held by Castine Capital Management, led by Paul Magidson, Jonathan Cohen. And Ostrom Enders, holding a $4.9 million position; 2.2% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group, and Israel Englander’s Millennium Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Elizabeth Park Capital Management. 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 here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s also examine hedge fund activity in other stocks similar to Mercantile Bank Corp. (NASDAQ:MBWM). We will take a look at Federated National Holding Co (NASDAQ:FNHC), Advaxis, Inc. (NASDAQ:ADXS), IDT Corporation (NYSE:IDT), and Extreme Networks, Inc (NASDAQ:EXTR). This group of stocks’ market caps are closest to Mercantile Bank Corp. (NASDAQ:MBWM)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FNHC | 10 | 62800 | 0 |
| ADXS | 21 | 128831 | 8 |
| IDT | 10 | 31178 | 2 |
| EXTR | 19 | 71631 | 3 |
As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $19 million in Mercantile Bank Corp. (NASDAQ:MBWM)’s case. Advaxis, Inc. (NASDAQ:ADXS) is the most popular stock in this table. On the other hand, Federated National Holding Co (NASDAQ:FNHC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks, Mercantile Bank Corp. (NASDAQ:MBWM) is even less popular than Federated National Holding Co (NASDAQ:FNHC). 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 analyze it in detail 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.
