Investing in hedge funds can bring large profits, but it’s not for everybody since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Maiden Holdings, Ltd. (NASDAQ:MHLD) a buy here? Money managers are in a bullish mood. The number of long hedge fund positions inched up by 1 in recent months. Our calculations also showed that MHLD isn’t among the 30 most popular stocks among hedge funds. MHLD was in 9 hedge funds’ portfolios at the end of the third quarter of 2018. There were 8 hedge funds in our database with MHLD positions at the end of the previous quarter.
Today there are a large number of indicators stock traders use to size up stocks. A duo of the most underrated indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best money managers can outpace the S&P 500 by a healthy margin (see the details here).
While collecting data for our write-up, we came across Miller Value Partners’ third-quarter 2018 letter to shareholders, that gives its opinion on Maiden Holdings. The fund increased its position in the company and had this to say in the letter:
“During the quarter, Maiden Holdings (MHLD), Bed Bath and Beyond (BBBY), Seaspan Corp (SSW), Teva Pharmaceuticals (TEVA) and Genworth (GNW) were the largest detractors, albeit their overall drag on the performance was less than half of the top five contributors during the quarter. We continue to believe each holding is well below its intrinsic value and have increased the positions sizes of each in both strategies.”
Our readers will be interested to know that the last major insider purchase of the company’s stock came at the hands of director Nigro, who snapped up 5,000 shares for $2.43 apiece. The shares are currently trading at $1.73, so the purchase was not exactly a lucrative one for him.
How are hedge funds trading Maiden Holdings, Ltd. (NASDAQ:MHLD)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in MHLD heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exist a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in Maiden Holdings, Ltd. (NASDAQ:MHLD), which was worth $2.2 million at the end of the third quarter. On the second spot was Capital Returns Management which amassed $1.5 million worth of shares. Moreover, Two Sigma Advisors, Marshall Wace LLP, and Citadel Investment Group were also bullish on Maiden Holdings, Ltd. (NASDAQ:MHLD), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Capital Returns Management, managed by Ron Bobman, created the largest position in Maiden Holdings, Ltd. (NASDAQ:MHLD). Capital Returns Management had $1.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new MHLD investors: Bradley LouisáRadoff’s Fondren Management and Benjamin A. Smith’s Laurion Capital Management.
Let’s now review hedge fund activity in other stocks similar to Maiden Holdings, Ltd. (NASDAQ:MHLD). We will take a look at Nuveen Select Tax-Free Income Portfolio 2 (NYSE:NXQ), Union Bankshares, Inc. (NASDAQ:UNB), Bovie Medical Corporation (NYSEAMEX:BVX), and ChromaDex Corporation (NASDAQ:CDXC). This group of stocks’ market values is closest to MHLD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NXQ | 1 | 167 | 0 |
| UNB | 1 | 850 | 0 |
| BVX | 6 | 27862 | 2 |
| CDXC | 2 | 382 | 0 |
| Average | 2.5 | 7315 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $7 million in MHLD’s case. Bovie Medical Corporation (NYSEAMEX:BVX) is the most popular stock in this table. On the other hand, 0 is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Maiden Holdings, Ltd. (NASDAQ:MHLD) 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.
