Should You Avoid MGP Ingredients Inc (MGPI)?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards MGP Ingredients Inc (NASDAQ:MGPI).

Is MGP Ingredients Inc (NASDAQ:MGPI) going to take off soon? Prominent investors are taking a bearish view. The number of long hedge fund positions decreased by 1 in recent months. MGPI was in 6 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with MGPI holdings 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 Tangoe Inc (NASDAQ:TNGO), SurModics, Inc. (NASDAQ:SRDX), and Fortuna Silver Mines Inc. (NYSE:FSM) to gather more data points.

In the financial world, there are a multitude of gauges market participants employ to size up publicly traded companies. Some of the less utilized gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can trounce the S&P 500 by a very impressive margin (see the details here).

With all of this in mind, let’s view the key action surrounding MGP Ingredients Inc (NASDAQ:MGPI).

How are hedge funds trading MGP Ingredients Inc (NASDAQ:MGPI)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 14% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Amici Capital, managed by Paul Orlin and Alex Porter, holds the number one position in MGP Ingredients Inc (NASDAQ:MGPI). The fund has reported a $5.3 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, led by Jim Simons, holding a $3.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Peter Muller’s PDT Partners.

Due to the fact that MGP Ingredients Inc (NASDAQ:MGPI) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies who were dropping their entire stakes by the end of the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group dumped the largest stake of all the hedgies followed by Insider Monkey, totaling about $0.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.4 million worth of MGPI shares. These transactions are important to note, as total hedge fund interest was cut by 1 fund by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MGP Ingredients Inc (NASDAQ:MGPI) but similarly valued. We will take a look at Tangoe Inc (NASDAQ:TNGO), SurModics, Inc. (NASDAQ:SRDX), Fortuna Silver Mines Inc. (NYSE:FSM), and EndoChoice Holdings Inc (NYSE:GI). This group of stocks’ market caps are similar to MGPI’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $9 million in MGPI’s case, a negative sign. SurModics, Inc. (NASDAQ:SRDX) is the most popular stock in this table, while EndoChoice Holdings Inc (NYSE:GI) is at the other end of the specter with only 9 bullish hedge fund positions. Compared to these stocks MGP Ingredients Inc (NASDAQ:MGPI) is even less popular than GI. 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.