Monmouth R.E. Inv. Corp. (MNR): Are Hedge Funds Right About This Stock?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Monmouth R.E. Inv. Corp. (NYSE:MNR)? The smart money sentiment can provide an answer to this question.

Monmouth R.E. Inv. Corp. (NYSE:MNR) was in 8 hedge funds’ portfolios at the end of September. Monmouth R.E. Inv. Corp. (NYSE:MNR) investors should be aware of a decrease in hedge fund interest recently. There were 9 hedge funds in our database with Monmouth R.E. Inv. Corp. (NYSE:MNR) holdings at the end of the previous quarter. It is important to note that the shares of the company rose less than 1% during the quarter, having negligible impact on the hedge fund sentiment.

One of the best ways to understand hedge fund sentiment is to evaluate their behavior towards stocks with similar market caps. At the end of this article, we will compare Monmouth R.E. Inv. Corp. (NYSE:MNR) to other stocks, including Matrix Service Co (NASDAQ:MTRX), Heritage Insurance Holdings Inc (NYSE:HRTG), and Gran Tierra Energy Inc. (NYSEMKT:GTE) to get a better sense of its popularity.

If you’d ask most traders, hedge funds are perceived as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds trading today, our experts look at the upper echelon of this club, around 700 funds. Most estimates calculate that this group of people watch over the majority of the smart money’s total asset base, and by keeping track of their unrivaled picks, Insider Monkey has uncovered a few investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to check out the fresh action surrounding Monmouth R.E. Inv. Corp. (NYSE:MNR).

Hedge fund activity in Monmouth R.E. Inv. Corp. (NYSE:MNR)

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 11% from the second quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, J. Alan Reid, Jr.’s Forward Management has the largest position in Monmouth R.E. Inv. Corp. (NYSE:MNR), worth close to $12.1 million, comprising 1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $6.6 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass John Overdeck and David Siegel’s Two Sigma Advisors, Jeffrey Bronchick’s Cove Street Capital, and D E Shaw.

Since Monmouth R.E. Inv. Corp. (NYSE:MNR) has experienced a falling interest from hedge fund managers, it’s safe to say that there is a sect of hedge funds that elected to cut their full holdings in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest stake of all the hedgies tracked by Insider Monkey, worth about $1.6 million in stock. Peter Muller’s fund, PDT Partners, also dropped its stock, about $0.1 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 fund in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Monmouth R.E. Inv. Corp. (NYSE:MNR) but similarly valued. We will take a look at Matrix Service Co (NASDAQ:MTRX), Heritage Insurance Holdings Inc (NYSE:HRTG), Gran Tierra Energy Inc. (NYSEMKT:GTE), and Capital Senior Living Corporation (NYSE:CSU). This group of stocks’ market values are similar to Monmouth R.E. Inv. Corp. (NYSE:MNR)’s market value.

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 $108 million. That figure was $23 million in Monmouth R.E. Inv. Corp. (NYSE:MNR)’s case. Capital Senior Living Corporation (NYSE:CSU) is the most popular stock in this table. On the other hand, Heritage Insurance Holdings Inc (NYSE:HRTG) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks, Monmouth R.E. Inv. Corp. (NYSE:MNR) is even less popular than Heritage Insurance Holdings Inc (NYSE:HRTG). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.