Is MGE Energy, Inc. (MGEE) a Good Buy?

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.

MGE Energy, Inc. (NASDAQ:MGEE) investors should pay attention to an increase in enthusiasm from smart money recently. MGEE was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. There were 6 hedge funds in our database with MGEE 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 Simmons First National Corporation (NASDAQ:SFNC), Select Medical Holdings Corporation (NYSE:SEM), and Prothena Corporation PLC (NASDAQ:PRTA) to gather more data points.

With all of this in mind, we’re going to view the latest action regarding MGE Energy, Inc. (NASDAQ:MGEE).

How are hedge funds trading MGE Energy, Inc. (NASDAQ:MGEE)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the largest position in MGE Energy, Inc. (NASDAQ:MGEE). Renaissance Technologies has a $10.1 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $3 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Roger Ibbotson’s Zebra Capital Management, Peter Muller’s PDT Partners and Ken Griffin’s Citadel Investment Group.

Now, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in MGE Energy, Inc. (NASDAQ:MGEE). Millennium Management had $3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1 million investment in the stock during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s check out hedge fund activity in other stocks similar to MGE Energy, Inc. (NASDAQ:MGEE). These stocks are Simmons First National Corporation (NASDAQ:SFNC), Select Medical Holdings Corporation (NYSE:SEM), Prothena Corporation PLC (NASDAQ:PRTA), and Third Point Reinsurance Ltd (NYSE:TPRE). This group of stocks’ market caps are closest to MGEE’s market cap.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $18 million in MGEE’s case. Select Medical Holdings Corporation (NYSE:SEM) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only 5 bullish hedge fund positions. MGE Energy, Inc. (NASDAQ:MGEE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SEM might be a better candidate to consider a long position.