In this article we will check out the progression of hedge fund sentiment towards Mercantile Bank Corp. (NASDAQ:MBWM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Mercantile Bank Corp. (NASDAQ:MBWM) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. MBWM investors should pay attention to a decrease in enthusiasm from smart money recently. There were 7 hedge funds in our database with MBWM positions at the end of the second quarter. Our calculations also showed that MBWM 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.
To most shareholders, hedge funds are viewed as worthless, outdated investment vehicles of the past. While there are greater than 8000 funds trading at the moment, Our experts hone in on the bigwigs of this group, approximately 850 funds. Most estimates calculate that this group of people shepherd most of the smart money’s total asset base, and by paying attention to their matchless investments, Insider Monkey has come up with many investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per 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 15 best blue chip stocks 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. Now let’s take a peek at the new hedge fund action encompassing Mercantile Bank Corp. (NASDAQ:MBWM).
Hedge fund activity in Mercantile Bank Corp. (NASDAQ:MBWM)
Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in MBWM a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Mercantile Bank Corp. (NASDAQ:MBWM), with a stake worth $15.1 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1.4 million. Citadel Investment Group, Millennium Management, and Two Sigma Advisors 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 Renaissance Technologies allocated the biggest weight to Mercantile Bank Corp. (NASDAQ:MBWM), around 0.02% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to MBWM.
Judging by the fact that Mercantile Bank Corp. (NASDAQ:MBWM) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers who sold off their positions entirely in the third quarter. Interestingly, Michael Gelband’s ExodusPoint Capital cut the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $0.2 million in stock. Chuck Royce’s fund, Royce & Associates, also sold off its stock, about $0 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mercantile Bank Corp. (NASDAQ:MBWM) but similarly valued. We will take a look at Ooma Inc (NYSE:OOMA), Concert Pharmaceuticals Inc (NASDAQ:CNCE), Urovant Sciences Ltd. (NASDAQ:UROV), Utah Medical Products, Inc. (NASDAQ:UTMD), Midland States Bancorp, Inc. (NASDAQ:MSBI), The Manitowoc Company, Inc. (NYSE:MTW), and Verona Pharma plc (NASDAQ:VRNA). This group of stocks’ market values resemble MBWM’s market value.
|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 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $18 million in MBWM’s case. The Manitowoc Company, Inc. (NYSE:MTW) is the most popular stock in this table. On the other hand Urovant Sciences Ltd. (NASDAQ:UROV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Mercantile Bank Corp. (NASDAQ:MBWM) is even less popular than UROV. Our overall hedge fund sentiment score for MBWM is 24. 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 MBWM 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on MBWM as the stock returned 41.8% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.