Hedge Funds Are Buying MDC Partners Inc. (USA) (MDCA)

Does MDC Partners Inc. (USA) (NASDAQ:MDCA) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Is MDC Partners Inc. (USA) (NASDAQ:MDCA) the right investment to pursue these days? Prominent investors are becoming hopeful. The number of long hedge fund positions moved up by 7 lately. At the end of this article we will also compare MDCA to other stocks, including Denny’s Corporation (NASDAQ:DENN), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), and Smith & Wesson Holding Corporation (NASDAQ:SWHC) to get a better sense of its popularity.

If you’d ask most traders, hedge funds are viewed as slow, outdated financial vehicles of the past. While there are over 8000 funds trading at present, We look at the crème de la crème of this club, around 700 funds. These hedge fund managers administer most of the smart money’s total asset base, and by observing their finest equity investments, Insider Monkey has figured out numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, let’s go over the new action encompassing MDC Partners Inc. (USA) (NASDAQ:MDCA).

What does the smart money think about MDC Partners Inc. (USA) (NASDAQ:MDCA)?

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 39% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Roystone Capital Partners, managed by Richard Barrera, holds the most valuable position in MDC Partners Inc. (USA) (NASDAQ:MDCA), worth an estimated $63.1 million and comprising 3% of its 13F portfolio. On Roystone Capital Partners’s heels is GMT Capital, led by Thomas E. Claugus, holding a $62.5 million position; 1.6% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Amy Minella’s Cardinal Capital, Leon Lowenstein’s Lionstone Capital Management and Israel Englander’s Millennium Management.

Consequently, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, created the biggest position in MDC Partners Inc. (USA) (NASDAQ:MDCA). Millennium Management had $15.4 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also made an $8.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard McGuire’s Marcato Capital Management, Neil Chriss’s Hutchin Hill Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MDC Partners Inc. (USA) (NASDAQ:MDCA) but similarly valued. These stocks are Denny’s Corporation (NASDAQ:DENN), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Smith & Wesson Holding Corporation (NASDAQ:SWHC), and Infinity Property and Casualty Corp. (NASDAQ:IPCC). This group of stocks’ market caps are closest to MDCA’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $268 million in MDCA’s case. Smith & Wesson Holding Corporation (NASDAQ:SWHC) is the most popular stock in this table. On the other hand Infinity Property and Casualty Corp. (NASDAQ:IPCC) is the least popular one with only 8 bullish hedge fund positions. MDC Partners Inc. (USA) (NASDAQ:MDCA) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SWHC might be a better candidate to consider a long position.