Were Hedge Funds Right About MBIA Inc. (MBI)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about MBIA Inc. (NYSE:MBI) in this article.

MBIA Inc. (NYSE:MBI) shareholders have witnessed an increase in hedge fund interest in recent months. MBIA Inc. (NYSE:MBI) was in 16 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. There were 12 hedge funds in our database with MBI positions at the end of the fourth quarter. Our calculations also showed that MBI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Andy Redleaf of Whitebox Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s view the new hedge fund action surrounding MBIA Inc. (NYSE:MBI).

Do Hedge Funds Think MBI Is A Good Stock To Buy Now?

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in MBI a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Kahn Brothers held the most valuable stake in MBIA Inc. (NYSE:MBI), which was worth $47.1 million at the end of the fourth quarter. On the second spot was Hosking Partners which amassed $28.3 million worth of shares. Southpoint Capital Advisors, Harspring Capital Management, and Chou Associates Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to MBIA Inc. (NYSE:MBI), around 7.29% of its 13F portfolio. Chou Associates Management is also relatively very bullish on the stock, earmarking 4.66 percent of its 13F equity portfolio to MBI.

Consequently, key hedge funds have been driving this bullishness. Southpoint Capital Advisors, managed by John Smith Clark, initiated the most outsized position in MBIA Inc. (NYSE:MBI). Southpoint Capital Advisors had $9.6 million invested in the company at the end of the quarter. Harry Gail’s Harspring Capital Management also made a $6 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Andy Redleaf’s Whitebox Advisors, and Nick Thakore’s Diametric Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MBIA Inc. (NYSE:MBI) but similarly valued. We will take a look at Bank of Marin Bancorp (NASDAQ:BMRC), Barrett Business Services, Inc. (NASDAQ:BBSI), American Superconductor Corporation (NASDAQ:AMSC), Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), TherapeuticsMD Inc (NASDAQ:TXMD), Akebia Therapeutics Inc (NASDAQ:AKBA), and Five Point Holdings, LLC (NYSE:FPH). This group of stocks’ market caps match MBI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $102 million in MBI’s case. TherapeuticsMD Inc (NASDAQ:TXMD) is the most popular stock in this table. On the other hand Bank of Marin Bancorp (NASDAQ:BMRC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks MBIA Inc. (NYSE:MBI) is more popular among hedge funds. Our overall hedge fund sentiment score for MBI is 75. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 28.5% in 2021 through July 23rd but still managed to beat the market by 10.1 percentage points. Hedge funds were also right about betting on MBI as the stock returned 24.1% since the end of March (through 7/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.

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