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Is Bank Mutual Corporation (BKMU) A Good Stock to Buy?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small-cap stocks, especially when they are screened well, can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Bank Mutual Corporation (NASDAQ:BKMU) from the perspective of those successful funds.

Bank Mutual Corporation (NASDAQ:BKMU) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September, same as at the end of June. At the end of this article we will also compare BKMU to other stocks including Corenergy Infrastructure Trust Inc (NYSE:CORR), Digimarc Corp (NASDAQ:DMRC), and Protagonist Therapeutics Inc (NASDAQ:PTGX) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How have hedgies been trading Bank Mutual Corporation (NASDAQ:BKMU)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BKMU over the last 5 quarters, which has remained relatively stable. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HedgeFundSentimentChart

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the biggest position in Bank Mutual Corporation (NASDAQ:BKMU), worth close to $13.3 million. The second most bullish fund manager is Israel Englander’s Millennium Management, which holds a $1.1 million position. Other peers with similar optimism include David E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors, and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

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 either. 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 take a look at hedge fund activity in other stocks – not necessarily in the same industry as Bank Mutual Corporation (NASDAQ:BKMU) but similarly valued. These stocks are Corenergy Infrastructure Trust Inc (NYSE:CORR), Digimarc Corp (NASDAQ:DMRC), Protagonist Therapeutics Inc (NASDAQ:PTGX), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). This group of stocks’ market valuations resemble BKMU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CORR 7 38593 3
DMRC 6 38689 1
PTGX 5 76793 5
RIGL 20 76901 1

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $16 million in BKMU’s case. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) is the most popular stock in this table. On the other hand Protagonist Therapeutics Inc (NASDAQ:PTGX) is the least popular one with only 5 bullish hedge fund positions. Bank Mutual Corporation (NASDAQ:BKMU) 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. In this regard RIGL might be a better candidate to consider taking a long position in.

Disclosure: None