In this article you are going to find out whether hedge funds think Meridian Corporation (NASDAQ:MRBK) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Meridian Corporation (NASDAQ:MRBK) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that MRBK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Delta Apparel, Inc. (NYSE:DLA), Chembio Diagnostics Inc (NASDAQ:CEMI), and Goodrich Petroleum Corporation (NYSE:GDP) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a gander at the fresh hedge fund action regarding Meridian Corporation (NASDAQ:MRBK).
How are hedge funds trading Meridian Corporation (NASDAQ:MRBK)?
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in MRBK a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, MFP Investors, managed by Michael Price, holds the biggest position in Meridian Corporation (NASDAQ:MRBK). MFP Investors has a $4.5 million position in the stock, comprising 0.8% of its 13F portfolio. Coming in second is Ancora Advisors, managed by Frederick DiSanto, which holds a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Meridian Corporation (NASDAQ:MRBK), around 0.81% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to MRBK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Basswood Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Renaissance Technologies).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Meridian Corporation (NASDAQ:MRBK) but similarly valued. We will take a look at Delta Apparel, Inc. (NYSE:DLA), Chembio Diagnostics Inc (NASDAQ:CEMI), Goodrich Petroleum Corporation (NYSE:GDP), Blue Apron Holdings, Inc. (NYSE:APRN), Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), and CVR Partners LP (NYSE:UAN). This group of stocks’ market valuations are closest to MRBK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLA | 8 | 7230 | 1 |
| CEMI | 3 | 2994 | -4 |
| GDP | 5 | 18855 | -1 |
| APRN | 7 | 5757 | 0 |
| ZYNE | 7 | 2590 | -5 |
| BLPH | 4 | 14748 | 1 |
| UAN | 2 | 7410 | -1 |
| Average | 5.1 | 8512 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $5 million in MRBK’s case. Delta Apparel, Inc. (NYSE:DLA) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 2 bullish hedge fund positions. Meridian Corporation (NASDAQ:MRBK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MRBK is 26.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on MRBK as the stock returned 18.1% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
Follow Meridian Corp (NASDAQ:MRBK)
Follow Meridian Corp (NASDAQ:MRBK)
Disclosure: None. This article was originally published at Insider Monkey.
