Is Malvern Bancorp, Inc. (MLVF) A Good Stock To Buy?

In this article we will take a look at whether hedge funds think Malvern Bancorp, Inc. (NASDAQ:MLVF) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is MLVF a good stock to buy? Malvern Bancorp, Inc. (NASDAQ:MLVF) has seen a decrease in activity from the world’s largest hedge funds of late. Malvern Bancorp, Inc. (NASDAQ:MLVF) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 10. Our calculations also showed that MLVF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Emanuel Friedman of EJF Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing Malvern Bancorp, Inc. (NASDAQ:MLVF).

Do Hedge Funds Think MLVF Is A Good Stock To Buy Now?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MLVF over the last 23 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, EJF Capital was the largest shareholder of Malvern Bancorp, Inc. (NASDAQ:MLVF), with a stake worth $11.9 million reported as of the end of March. Trailing EJF Capital was Fourthstone LLC, which amassed a stake valued at $2.4 million. Renaissance Technologies, Millennium Management, and Minerva Advisors were 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 Fourthstone LLC allocated the biggest weight to Malvern Bancorp, Inc. (NASDAQ:MLVF), around 1.18% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 0.86 percent of its 13F equity portfolio to MLVF.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Seidman Investment Partnership. 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 none of the 750+ hedge funds tracked by Insider Monkey identified MLVF as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Malvern Bancorp, Inc. (NASDAQ:MLVF) but similarly valued. We will take a look at Educational Development Corporation (NASDAQ:EDUC), Clearside Biomedical, Inc. (NASDAQ:CLSD), Graham Corporation (NYSE:GHM), BM Technologies, Inc. (NYSE:BMTX), Alithya Group inc. (NASDAQ:ALYA), Titan Medical Inc. (NASDAQ:TMDI), and SandRidge Energy Inc. (NYSE:SD). This group of stocks’ market valuations match MLVF’s market valuation.

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As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $19 million in MLVF’s case. SandRidge Energy Inc. (NYSE:SD) is the most popular stock in this table. On the other hand Educational Development Corporation (NASDAQ:EDUC) is the least popular one with only 2 bullish hedge fund positions. Malvern Bancorp, Inc. (NASDAQ:MLVF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MLVF is 34.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately MLVF wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MLVF investors were disappointed as the stock returned -0.4% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.