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 MidWestOne Financial Group, Inc. (NASDAQ:MOFG).
Is MOFG a good stock to buy now? Hedge funds were in a bearish mood. The number of long hedge fund bets retreated by 2 lately. MidWestOne Financial Group, Inc. (NASDAQ:MOFG) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that MOFG 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). There were 9 hedge funds in our database with MOFG positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are over 8000 funds in operation today, Our experts hone in on the moguls of this group, about 850 funds. These investment experts handle most of the hedge fund industry’s total capital, and by tailing their finest picks, Insider Monkey has brought to light a few investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Now let’s review the new hedge fund action regarding MidWestOne Financial Group, Inc. (NASDAQ:MOFG).
Hedge fund activity in MidWestOne Financial Group, Inc. (NASDAQ:MOFG)
At third quarter’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in MOFG a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of MidWestOne Financial Group, Inc. (NASDAQ:MOFG), with a stake worth $1.7 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $1.5 million. Citadel Investment Group, Winton Capital Management, and Marshall Wace LLP 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 Winton Capital Management allocated the biggest weight to MidWestOne Financial Group, Inc. (NASDAQ:MOFG), around 0.02% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to MOFG.
Because MidWestOne Financial Group, Inc. (NASDAQ:MOFG) has experienced falling interest from the smart money, it’s safe to say that there was a specific group of hedge funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $0.7 million in stock, and Cliff Asness’s AQR Capital Management was right behind this move, as the fund cut about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to MidWestOne Financial Group, Inc. (NASDAQ:MOFG). These stocks are SCVX Corp. (NYSE:SCVX), Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), Cassava Sciences, Inc. (NASDAQ:SAVA), DXP Enterprises Inc (NASDAQ:DXPE), Funko, Inc. (NASDAQ:FNKO), Peapack-Gladstone Financial Corp (NASDAQ:PGC), and Affimed NV (NASDAQ:AFMD). This group of stocks’ market caps match MOFG’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 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $5 million in MOFG’s case. SCVX Corp. (NYSE:SCVX) is the most popular stock in this table. On the other hand Cassava Sciences, Inc. (NASDAQ:SAVA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks MidWestOne Financial Group, Inc. (NASDAQ:MOFG) is even less popular than SAVA. Our overall hedge fund sentiment score for MOFG is 26.3. 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. Hedge funds clearly dropped the ball on MOFG as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on MOFG as the stock returned 37% since Q3 (through December 2nd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.