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Mackinac Financial Corporation (MFNC): Hedge Funds Are Nibbling

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Mackinac Financial Corporation (NASDAQ:MFNC) based on that data.

Mackinac Financial Corporation (NASDAQ:MFNC) was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. MFNC has seen an increase in support from the world’s most elite money managers recently. There were 4 hedge funds in our database with MFNC holdings at the end of the previous quarter. Our calculations also showed that MFNC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

RENAISSANCE TECHNOLOGIES

Jim Simons Founder of Renaissance Technologies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action surrounding Mackinac Financial Corporation (NASDAQ:MFNC).

How are hedge funds trading Mackinac Financial Corporation (NASDAQ:MFNC)?

Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in MFNC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, EJF Capital held the most valuable stake in Mackinac Financial Corporation (NASDAQ:MFNC), which was worth $5.6 million at the end of the third quarter. On the second spot was Tontine Asset Management which amassed $1.9 million worth of shares. Renaissance Technologies, Minerva Advisors, and Fourthstone LLC 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 EJF Capital allocated the biggest weight to Mackinac Financial Corporation (NASDAQ:MFNC), around 1.17% of its 13F portfolio. Tontine Asset Management is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to MFNC.

As one would reasonably expect, key money managers have jumped into Mackinac Financial Corporation (NASDAQ:MFNC) headfirst. Fourthstone LLC, managed by Phil Stone, assembled the biggest position in Mackinac Financial Corporation (NASDAQ:MFNC). Fourthstone LLC had $0.2 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks similar to Mackinac Financial Corporation (NASDAQ:MFNC). We will take a look at Anworth Mortgage Asset Corporation (NYSE:ANH), Pixelworks, Inc. (NASDAQ:PXLW), Galectin Therapeutics Inc. (NASDAQ:GALT), and Neptune Wellness Solutions Inc. (NASDAQ:NEPT). This group of stocks’ market valuations match MFNC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANH 10 12358 -4
PXLW 8 7919 1
GALT 3 190 -1
NEPT 4 16529 -1
Average 6.25 9249 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $9 million in MFNC’s case. Anworth Mortgage Asset Corporation (NYSE:ANH) is the most popular stock in this table. On the other hand Galectin Therapeutics Inc. (NASDAQ:GALT) is the least popular one with only 3 bullish hedge fund positions. Mackinac Financial Corporation (NASDAQ:MFNC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately MFNC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MFNC investors were disappointed as the stock returned 2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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