Is Capital Southwest Corporation (CSWC) A Good Stock To Buy According To Hedge Funds?

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It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Capital Southwest Corporation (NASDAQ:CSWC) .

Capital Southwest Corporation (NASDAQ:CSWC) shareholders have witnessed an increase in hedge fund sentiment of late. There were 7 hedge funds in our database with CSWC positions at the end of the previous quarter. 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 Fluidigm Corporation (NASDAQ:FLDM), CSS Industries, Inc. (NYSE:CSS), and Reis Inc (NASDAQ:REIS) to gather more data points.

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With all of this in mind, let’s analyze the recent action regarding Capital Southwest Corporation (NASDAQ:CSWC).

Hedge fund activity in Capital Southwest Corporation (NASDAQ:CSWC)

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CSWC over the last 5 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Moab Capital Partners, led by Michael M. Rothenberg, holds the biggest position in Capital Southwest Corporation (NASDAQ:CSWC). Moab Capital Partners has a $24.4 million position in the stock, comprising 7.9% of its 13F portfolio. Coming in second is Ariel Investments, led by John W. Rogers, which holds a $12.5 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism comprise Martin Whitman’s Third Avenue Management, Bruce Silver’s Silver Capital Management LLC and D. E. Shaw’s D E Shaw, one of the biggest hedge funds in the world. We should note that Moab Capital Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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