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Should You Avoid MINDBODY Inc (MB)?

The market has been volatile as the Federal Reserve continues its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points through November 16th. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of MINDBODY Inc (NASDAQ:MB) and find out how it is affected by hedge funds’ moves.

Is MINDBODY Inc (NASDAQ:MB) a buy, sell, or hold? Prominent investors are selling. The number of long hedge fund bets shrunk by 2 recently. Our calculations also showed that mb isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Christian Leone Luxor Capital

We’re going to take a look at the fresh hedge fund action regarding MINDBODY Inc (NASDAQ:MB).

Hedge fund activity in MINDBODY Inc (NASDAQ:MB)

Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in MB heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with MB Positions

More specifically, Luxor Capital Group was the largest shareholder of MINDBODY Inc (NASDAQ:MB), with a stake worth $263.2 million reported as of the end of September. Trailing Luxor Capital Group was SQN Investors, which amassed a stake valued at $79.2 million. Balyasny Asset Management, Two Sigma Advisors, and Diker Management were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that MINDBODY Inc (NASDAQ:MB) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who were dropping their full holdings heading into Q3. At the top of the heap, D. E. Shaw’s D E Shaw said goodbye to the biggest position of all the hedgies watched by Insider Monkey, totaling close to $5.8 million in stock. Nick Niell’s fund, Arrowgrass Capital Partners, also said goodbye to its stock, about $4.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MINDBODY Inc (NASDAQ:MB) but similarly valued. These stocks are Nuveen Municipal Value Fund, Inc. (NYSE:NUV), Opko Health Inc. (NASDAQ:OPK), Silicon Motion Technology Corp. (NASDAQ:SIMO), and Vector Group Ltd (NYSE:VGR). This group of stocks’ market valuations are closest to MB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NUV 2 194 -1
OPK 14 4643 4
SIMO 16 221088 3
VGR 18 174166 1
Average 12.5 100023 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $413 million in MB’s case. Vector Group Ltd (NYSE:VGR) is the most popular stock in this table. On the other hand Nuveen Municipal Value Fund, Inc. (NYSE:NUV) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks MINDBODY Inc (NASDAQ:MB) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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