While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Mid Penn Bancorp (NASDAQ:MPB).
Mid Penn Bancorp (NASDAQ:MPB) has seen a decrease in activity from the world’s largest hedge funds of late. Mid Penn Bancorp (NASDAQ:MPB) was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 4. There were 4 hedge funds in our database with MPB holdings at the end of June. Our calculations also showed that MPB 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.
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 10 most profitable companies in the world 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. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding Mid Penn Bancorp (NASDAQ:MPB).
How are hedge funds trading Mid Penn Bancorp (NASDAQ:MPB)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2020. By comparison, 4 hedge funds held shares or bullish call options in MPB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mid Penn Bancorp (NASDAQ:MPB) was held by Tontine Asset Management, which reported holding $1.5 million worth of stock at the end of September. It was followed by EJF Capital with a $0.8 million position. The only other hedge fund that is bullish on the company was Minerva Advisors.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. 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 none of the 750+ hedge funds tracked by Insider Monkey identified MPB as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks similar to Mid Penn Bancorp (NASDAQ:MPB). These stocks are Emerald Holding, Inc. (NYSE:EEX), Monroe Capital Corp (NASDAQ:MRCC), Lincoln Educational Services Corporation (NASDAQ:LINC), comScore, Inc. (NASDAQ:SCOR), American Realty Investors, Inc. (NYSE:ARL), Bel Fuse, Inc. (NASDAQ:BELFA), and Lyra Therapeutics, Inc. (NASDAQ:LYRA). This group of stocks’ market caps are closest to MPB’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.4 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $3 million in MPB’s case. comScore, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand American Realty Investors, Inc. (NYSE:ARL) is the least popular one with only 1 bullish hedge fund positions. Mid Penn Bancorp (NASDAQ:MPB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MPB is 34.8. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on MPB as the stock returned 29.2% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.