Is Malvern Bancorp (MLVF) A Good Investment Now?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Malvern Bancorp, Inc. (NASDAQ:MLVF) based on those filings.

Is Malvern Bancorp, Inc. (NASDAQ:MLVF) a good investment now? Money managers were taking a bearish view. The number of bullish hedge fund positions retreated by 3 recently. Malvern Bancorp, Inc. (NASDAQ:MLVF) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. 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 for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Lawrence Seidman of Seidman Investment Partnership

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the new hedge fund action surrounding Malvern Bancorp, Inc. (NASDAQ:MLVF).

What have hedge funds been doing with Malvern Bancorp, Inc. (NASDAQ:MLVF)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MLVF over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Seidman Investment Partnership was the largest shareholder of Malvern Bancorp, Inc. (NASDAQ:MLVF), with a stake worth $8.3 million reported as of the end of September. Trailing Seidman Investment Partnership was EJF Capital, which amassed a stake valued at $7.6 million. Fourthstone LLC, Renaissance Technologies, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Malvern Bancorp, Inc. (NASDAQ:MLVF), around 12.76% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, setting aside 1.73 percent of its 13F equity portfolio to MLVF.

Since Malvern Bancorp, Inc. (NASDAQ:MLVF) has witnessed falling interest from the smart money, it’s easy to see that there exists a select few hedge funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital dropped the largest stake of all the hedgies watched by Insider Monkey, totaling close to $0.2 million in stock. Donald Sussman’s fund, Paloma Partners, also dropped its stock, about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Malvern Bancorp, Inc. (NASDAQ:MLVF). We will take a look at DLH Holdings Corp. (NASDAQ:DLHC), Phoenix New Media Ltd (NYSE:FENG), Electromed, Inc. (NYSE:ELMD), Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), PAVmed Inc. (NASDAQ:PAVM), Beyond Air, Inc. (NASDAQ:XAIR), and Dynagas LNG Partners LP (NYSE:DLNG). All of these stocks’ market caps resemble MLVF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLHC 8 35961 3
FENG 8 4029 2
ELMD 6 5692 2
PEBK 2 3804 -1
PAVM 5 1137 2
XAIR 1 2652 -3
DLNG 1 153 0
Average 4.4 7633 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $21 million in MLVF’s case. DLH Holdings Corp. (NASDAQ:DLHC) is the most popular stock in this table. On the other hand Beyond Air, Inc. (NASDAQ:XAIR) is the least popular one with only 1 bullish hedge fund positions. Malvern Bancorp, Inc. (NASDAQ:MLVF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MLVF is 65.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on MLVF as the stock returned 39.8% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.