There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Main Street Capital Corporation (NYSE:MAIN) .
Main Street Capital Corporation (NYSE:MAIN) was in 8 hedge funds’ portfolios at the end of September. MAIN has seen an increase in hedge fund interest of late. There were 6 hedge funds in our database with MAIN 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 GATX Corporation (NYSE:GATX), 2U Inc (NASDAQ:TWOU), and NovaGold Resources Inc. (USA) (NYSEAMEX:NG) to gather more data points.
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.
Keeping this in mind, we’re going to check out the key action surrounding Main Street Capital Corporation (NYSE:MAIN).
What does the smart money think about Main Street Capital Corporation (NYSE:MAIN)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MAIN over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Brian Ashford-Russell and Tim Woolley’s Polar Capital has the biggest position in Main Street Capital Corporation (NYSE:MAIN), worth close to $3.9 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by McKinley Capital Management, led by Robert B. Gillam, which holds a $3.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions contain John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and George Hall’s Clinton 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-microcap stocks.
As industrywide interest jumped, key money managers have jumped into Main Street Capital Corporation (NYSE:MAIN) headfirst. Two Sigma Advisors, led by John Overdeck and David Siegel, assembled the largest position in Main Street Capital Corporation (NYSE:MAIN). Two Sigma Advisors had $3.7 million invested in the company at the end of the quarter, one of the biggest hedge funds in the world, D E Shaw also made a $1 million investment in the stock during the quarter. The other funds with brand new MAIN positions are Matthew Hulsizer’s PEAK6 Capital Management and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks similar to Main Street Capital Corporation (NYSE:MAIN). These stocks are GATX Corporation (NYSE:GATX), 2U Inc (NASDAQ:TWOU), NovaGold Resources Inc. (USA) (NYSEAMEX:NG), and The Geo Group, Inc. (NYSE:GEO). All of these stocks’ market caps match MAIN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $15 million in MAIN’s case. NovaGold Resources Inc. (USA) (NYSEAMEX:NG) is the most popular stock in this table. On the other hand GATX Corporation (NYSE:GATX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Main Street Capital Corporation (NYSE:MAIN) is even less popular than GATX. 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.