Should You Avoid QCR Holdings, Inc. (QCRH)?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards QCR Holdings, Inc. (NASDAQ:QCRH), and what that likely means for the prospects of the company and its stock.

Is QCR Holdings, Inc. (NASDAQ:QCRH) an excellent investment now? Investors who are in the know are definitely becoming less confident. The number of bullish hedge fund investments dropped by 1 in recent months. There were 7 hedge funds in our database with QCRH holdings at the end of the previous quarter. At the end of this article we will also compare QCRH to other stocks including Federal Agricultural Mortgage Corp. (NYSE:AGM), Suffolk Bancorp (NYSE:SCNB), and Lindblad Expeditions Holdings Inc (NASDAQ:LIND) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to take a glance at the key action surrounding QCR Holdings, Inc. (NASDAQ:QCRH).

How are hedge funds trading QCR Holdings, Inc. (NASDAQ:QCRH)?

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 change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in QCRH over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Paul Magidson, Jonathan Cohen. And Ostrom Enders’ Castine Capital Management has the biggest position in QCR Holdings, Inc. (NASDAQ:QCRH), worth close to $16.1 million, amounting to 8% of its total 13F portfolio. The second most bullish fund manager is Robert I. Usdan and Wayne K. Goldstein of Endicott Management, with a $13.7 million position; the fund has 6.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Fred Cummings’s Elizabeth Park Capital Management, Jim Simons’ Renaissance Technologies, one of the largest hedge funds in the world, and Tom Brown’s Second Curve Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dropped their entire stakes in the stock during the third quarter. At the top of the heap, Joseph A. Jolson’s Harvest Capital Strategies dropped the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $0.4 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dumped about $0 million worth of shares.

Let’s now review hedge fund activity in other stocks similar to QCR Holdings, Inc. (NASDAQ:QCRH). We will take a look at Federal Agricultural Mortgage Corp. (NYSE:AGM), Suffolk Bancorp (NYSE:SCNB), Lindblad Expeditions Holdings Inc (NASDAQ:LIND), and DXP Enterprises Inc (NASDAQ:DXPE). This group of stocks’ market valuations resemble QCRH’s market valuation.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $47 million in QCRH’s case. Lindblad Expeditions Holdings Inc (NASDAQ:LIND) is the most popular stock in this table. On the other hand Suffolk Bancorp (NYSE:SCNB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks QCR Holdings, Inc. (NASDAQ:QCRH) is even less popular than SCNB. 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.

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Disclosure: None