Is Merchants Bancshares,Inc. (MBVT) A Good Stock To Buy?

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 in this case, 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 Harvest Capital Strategies).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Merchants Bancshares, Inc. (NASDAQ:MBVT) but similarly valued. These stocks are Blueknight Energy Partners L.P. (NASDAQ:BKEP), Five9 Inc (NASDAQ:FIVN), North Atlantic Drilling Ltd. (NYSE:NADL), and New America High Income Fund Inc. (NYSE:HYB). This group of stocks’ market valuations are closest to MBVT’s market valuation.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $15 million, compared to $7 million in MBVT’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table while, North Atlantic Drilling Ltd. (NYSE:NADL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Merchants Bancshares, Inc. (NASDAQ:MBVT) is not very popular, as it also registered only 4 funds with long positions. 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 required.