Hedge Funds Are Buying MB Financial, Inc. (MBFI)

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like MB Financial, Inc. (NASDAQ:MBFI).

Is MB Financial, Inc. (NASDAQ:MBFI) a safe investment today? Money managers are in an optimistic mood. The number of long hedge fund positions improved by 1 lately. MBFI was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. There were 8 hedge funds in our database with MBFI positions at the end of the previous quarter. 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 Kate Spade & Co (NYSE:KATE), Kite Pharma Inc (NASDAQ:KITE), and Puma Biotechnology Inc (NYSE:PBYI) to gather more data points.

To the average investor, there are several tools stock market investors put to use to size up stocks. A couple of the most innovative tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outpace their index-focused peers by a significant amount (see the details here).

With all of this in mind, let’s take a look at the key action encompassing MB Financial, Inc. (NASDAQ:MBFI).

Hedge fund activity in MB Financial, Inc. (NASDAQ:MBFI)

At the Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Munder Capital Group, managed by Lee Munder, holds the biggest position in MB Financial, Inc. (NASDAQ:MBFI). Lee Munder Capital Group has an $20.3 million position in the stock, comprising 0.4% of its 13F portfolio. On Lee Munder Capital Group’s heels is Basswood Capital, led by Matthew Lindenbaum, holding an $5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Jim Simons’ Renaissance Technologies, Peter Muller’s PDT Partners and Cliff Asness’s AQR Capital Management.

As industrywide interest jumped, some big names were leading the bulls’ herd. PDT Partners created the biggest position in MB Financial, Inc. (NASDAQ:MBFI). PDT Partners had $1.8 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated an $1.2 million position during the quarter. The following funds were also among the new MBFI investors: Paul Tudor Jones’ Tudor Investment Corp and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MB Financial, Inc. (NASDAQ:MBFI) but similarly valued. These stocks are Kate Spade & Co (NYSE:KATE), Kite Pharma Inc (NASDAQ:KITE), Puma Biotechnology Inc (NYSE:PBYI), and United Natural Foods, Inc. (NASDAQ:UNFI). This group of stocks’ market caps resemble MBFI’s market cap.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $469 million. That figure was $35 million in MBFI’s case. Kate Spade & Co (NYSE:KATE) is the most popular stock in this table. On the other hand United Natural Foods, Inc. (NASDAQ:UNFI) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks, MB Financial, Inc. (NASDAQ:MBFI) is even less popular than UNFI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.