The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Alcentra Capital Corp. (NASDAQ:ABDC) based on those filings.
Alcentra Capital Corp. (NASDAQ:ABDC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare ABDC to other stocks including Park City Group, Inc. (NYSE:PCYG), Meridian Bank (NASDAQ:MRBK), and Eastman Kodak Co. (NYSE:KODK) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Price of MFP Investors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s analyze the key hedge fund action surrounding Alcentra Capital Corp. (NASDAQ:ABDC).
How have hedgies been trading Alcentra Capital Corp. (NASDAQ:ABDC)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in ABDC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, MFP Investors was the largest shareholder of Alcentra Capital Corp. (NASDAQ:ABDC), with a stake worth $1.5 million reported as of the end of September. Trailing MFP Investors was Almitas Capital, which amassed a stake valued at $0.6 million. Millennium Management was 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 Almitas Capital allocated the biggest weight to Alcentra Capital Corp. (NASDAQ:ABDC), around 0.59% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to ABDC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Almitas Capital).
Let’s now take a look at hedge fund activity in other stocks similar to Alcentra Capital Corp. (NASDAQ:ABDC). We will take a look at Park City Group, Inc. (NYSE:PCYG), Meridian Bank (NASDAQ:MRBK), Eastman Kodak Co. (NYSE:KODK), and SilverBow Resorces, Inc. (NYSE:SBOW). This group of stocks’ market valuations are closest to ABDC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PCYG | 3 | 569 | -1 |
| MRBK | 5 | 20857 | 0 |
| KODK | 5 | 13670 | 0 |
| SBOW | 6 | 68043 | 1 |
| Average | 4.75 | 25785 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $3 million in ABDC’s case. SilverBow Resorces, Inc. (NYSE:SBOW) is the most popular stock in this table. On the other hand Park City Group, Inc. (NYSE:PCYG) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Alcentra Capital Corp. (NASDAQ:ABDC) is even less popular than PCYG. Hedge funds dodged a bullet by taking a bearish stance towards ABDC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ABDC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ABDC investors were disappointed as the stock returned 3.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
