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 MVC Capital, Inc. (NYSE:MVC) ready to rally soon? Investors who are in the know are really becoming hopeful. The number of long hedge fund bets went up by 1 lately. There were 9 hedge funds in our database with MVC holdings at the end of the previous quarter. Now there are 10 as of the end of Q3. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Northern Dynasty Minerals Ltd. (USA) (NYSEAMEX:NAK), Investors Title Company (NASDAQ:ITIC), and Brookfield High Income Fund Inc (NYSE:HHY) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to view the new action regarding MVC Capital, Inc. (NYSE:MVC).
How have hedgies been trading MVC Capital, Inc. (NYSE:MVC)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in MVC over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Nelson Obus’ Wynnefield Capital has the largest position in MVC Capital, Inc. (NYSE:MVC), worth close to $13.3 million, corresponding to 4.5% of its total 13F portfolio. Sitting at the No. 2 spot is Phillip Goldstein, Andrew Dakos and Steven Samuels of Bulldog Investors, with a $11.4 million position; 2.6% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish consist of Chuck Royce’s Royce & Associates, Paul J. Isaac’s Arbiter Partners Capital Management and D E Shaw, one of the biggest hedge funds in the world. We should note that Arbiter Partners Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. GRT Capital Partners, led by Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk, created the largest position in MVC Capital, Inc. (NYSE:MVC). GRT Capital Partners had $0.1 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MVC Capital, Inc. (NYSE:MVC) but similarly valued. These stocks are Northern Dynasty Minerals Ltd. (USA) (NYSEAMEX:NAK), Investors Title Company (NASDAQ:ITIC), Brookfield High Income Fund Inc (NYSE:HHY), and Rosetta Stone Inc (NYSE:RST). This group of stocks’ market valuations are closest to MVC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NAK | 7 | 8963 | 2 |
| ITIC | 2 | 22716 | 0 |
| HHY | 3 | 3689 | 0 |
| RST | 10 | 93566 | 0 |
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $40 million in MVC’s case. Rosetta Stone Inc (NYSE:RST) is the most popular stock in this table. On the other hand Investors Title Company (NASDAQ:ITIC) is the least popular one with only 2 bullish hedge fund positions. MVC Capital, Inc. (NYSE:MVC) is among the most popular stocks in this group according to our data, and the stock might be worth a closer look.
Disclosure: None
