We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Main Street Capital Corporation (NYSE:MAIN).
Main Street Capital Corporation (NYSE:MAIN) investors should be aware of an increase in support from the world’s most elite money managers lately. Our calculations also showed that MAIN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Wall Street Bull
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the fresh hedge fund action regarding Main Street Capital Corporation (NYSE:MAIN).
What does smart money think about Main Street Capital Corporation (NYSE:MAIN)?
At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 80% from the third quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in MAIN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Main Street Capital Corporation (NYSE:MAIN) was held by McKinley Capital Management, which reported holding $7.3 million worth of stock at the end of September. It was followed by Brasada Capital Management with a $6.7 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Driehaus Capital. In terms of the portfolio weights assigned to each position Brasada Capital Management allocated the biggest weight to Main Street Capital Corporation (NYSE:MAIN), around 1.67% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, dishing out 0.47 percent of its 13F equity portfolio to MAIN.
Now, specific money managers were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, assembled the most valuable position in Main Street Capital Corporation (NYSE:MAIN). Driehaus Capital had $0.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new MAIN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Main Street Capital Corporation (NYSE:MAIN) but similarly valued. We will take a look at MGE Energy, Inc. (NASDAQ:MGEE), First Interstate Bancsystem Inc (NASDAQ:FIBK), Advanced Energy Industries, Inc. (NASDAQ:AEIS), and Wolverine World Wide, Inc. (NYSE:WWW). This group of stocks’ market values are closest to MAIN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGEE | 9 | 43218 | -5 |
| FIBK | 12 | 58971 | 2 |
| AEIS | 20 | 149266 | 3 |
| WWW | 23 | 119537 | 2 |
| Average | 16 | 92748 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $19 million in MAIN’s case. Wolverine World Wide, Inc. (NYSE:WWW) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Main Street Capital Corporation (NYSE:MAIN) is even less popular than MGEE. Hedge funds dodged a bullet by taking a bearish stance towards MAIN. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately MAIN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MAIN investors were disappointed as the stock returned -55.5% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
