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Should You Avoid Medallion Financial Corp (TAXI)?

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Medallion Financial Corp (NASDAQ:TAXI) was in 7 hedge funds’ portfolios at the end of September. Medallion Financial Corp (NASDAQ:TAXI) investors should be aware of a decrease in hedge fund interest in recent months. There were 13 hedge funds in our database with Medallion Financial Corp (NASDAQ:TAXI) holdings at the end of the previous quarter. The hedge fund sentiment echoed the trading sentiment surrounding the stock, as it dropped 9.22% during the last quarter. For a better understanding of the hedge fund behavior, we will cover hedge funds that held positions in Medallion Financial Corp (NASDAQ:TAXI) at the end of the third quarter.

At the end of this article we will also compare Medallion Financial Corp (NASDAQ:TAXI) to other stocks, including MVC Capital, Inc. (NYSE:MVC), Merchants Bancshares,Inc. (NASDAQ:MBVT), and Blueknight Energy Partners L.P. (NASDAQ:BKEP) to get a better sense of its popularity.

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Today there are many methods market participants employ to assess stocks. A couple of the most innovative methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best fund managers can outperform the S&P 500 by a significant amount (see the details here).

With all of this in mind, we’re going to take a peek at the new action regarding Medallion Financial Corp (NASDAQ:TAXI).

What does the smart money think about Medallion Financial Corp (NASDAQ:TAXI)?

At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 46% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund and institutional investor database, Selz Capital, managed by Bernard Selz, holds the biggest position in Medallion Financial Corp (NASDAQ:TAXI). Selz Capital has a $4.2 million position in the stock, comprising 1.1% of its 13F portfolio. On Selz Capital’s heels is Mario Gabelli of GAMCO Investors, with a $1 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management, and Murray Stahl’s Horizon Asset Management.

Because Medallion Financial Corp (NASDAQ:TAXI) has witnessed a bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedgies who sold off their full holdings by the end of the third quarter. Intriguingly, Mark Broach’s Manatuck Hill Partners sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $4.2 million in stock. Joseph A. Jolson’s fund, Harvest Capital Strategies, also dumped its stock, about $3.3 million worth of shares. These transactions are important to note, as total hedge fund interest was cut by 6 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Medallion Financial Corp (NASDAQ:TAXI). These stocks are MVC Capital, Inc. (NYSE:MVC), Merchants Bancshares,Inc. (NASDAQ:MBVT), Blueknight Energy Partners L.P. (NASDAQ:BKEP), and Five9 Inc (NASDAQ:FIVN). This group of stocks’ market values are similar to Medallion Financial Corp (NASDAQ:TAXI)’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MVC 8 23554 -2
MBVT 4 6625 0
BKEP 5 36682 1
FIVN 7 9920 -6

As you can see, these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $8 million in Medallion Financial Corp (NASDAQ:TAXI)’s case. MVC Capital, Inc. (NYSE:MVC) is the most popular stock in this table. On the other hand, Merchants Bancshares,Inc. (NASDAQ:MBVT) is the least popular one with only 4 bullish hedge fund positions. Medallion Financial Corp (NASDAQ:TAXI) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, MVC Capital, Inc. (NYSE:MVC) might be a better candidate to consider a long position.

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