Should You Buy MBIA Inc. (MBI)?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Is MBIA Inc. (NYSE:MBI) a healthy stock for your portfolio? The smart money is becoming hopeful. The number of bullish hedge fund positions moved up by 2 recently. 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 Outerwall Inc (NASDAQ:OUTR), Meritor Inc (NYSE:MTOR), and McDermott International (NYSE:MDR) to gather more data points.

With all of this in mind, let’s review the fresh action surrounding MBIA Inc. (NYSE:MBI).

What does the smart money think about MBIA Inc. (NYSE:MBI)?

At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeffrey Tannenbaum’s Fir Tree has the biggest position in MBIA Inc. (NYSE:MBI), worth close to $34 million, amounting to 0.6% of its total 13F portfolio. The second most bullish fund manager is Ron Gutfleish of Elm Ridge Capital, with a $31.6 million position; 4.6% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism consist of Debra Fine’s Fine Capital Partners, Chuck Royce’s Royce & Associates and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

As industrywide interest jumped, some big names were breaking ground themselves. Cobalt Capital Management, managed by Wayne Cooperman, created the most valuable position in MBIA Inc. (NYSE:MBI). Cobalt Capital Management had $3.3 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $1.7 million position during the quarter. The following funds were also among the new MBI investors: Steve Cohen’s Point72 Asset Management, Glenn Russell Dubin’s Highbridge Capital Management, and Mike Vranos’s Ellington.

Let’s now take a look at hedge fund activity in other stocks similar to MBIA Inc. (NYSE:MBI). We will take a look at Outerwall Inc (NASDAQ:OUTR), Meritor Inc (NYSE:MTOR), McDermott International (NYSE:MDR), and InfraREIT Inc (NYSE:HIFR). All of these stocks’ market caps are closest to MBI’s market cap.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $263 million in MBI’s case. Outerwall Inc (NASDAQ:OUTR) is the most popular stock in this table. On the other hand InfraREIT Inc (NYSE:HIFR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks MBIA Inc. (NYSE:MBI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.