November 26, 2022

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Hedge Funds Are Selling Marlin Business Services Corp. (MRLN)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Marlin Business Services Corp. (NASDAQ:MRLN).

Marlin Business Services Corp. (NASDAQ:MRLN) investors should pay attention to a decrease in hedge fund interest recently. Marlin Business Services Corp. (NASDAQ:MRLN) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. Our calculations also showed that MRLN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind let’s take a glance at the latest hedge fund action regarding Marlin Business Services Corp. (NASDAQ:MRLN).

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

At first quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MRLN over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Matthew Lindenbaum’s Basswood Capital has the largest position in Marlin Business Services Corp. (NASDAQ:MRLN), worth close to $16.2 million, corresponding to 0.7% of its total 13F portfolio. The second most bullish fund manager of Renaissance Technologies, with a $5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Frederick DiSanto’s Ancora Advisors and . In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to Marlin Business Services Corp. (NASDAQ:MRLN), around 0.73% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to MRLN.

Judging by the fact that Marlin Business Services Corp. (NASDAQ:MRLN) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few fund managers who sold off their entire stakes in the first quarter. It’s worth mentioning that Travis Cocke’s Voss Capital sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $0.8 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Marlin Business Services Corp. (NASDAQ:MRLN) but similarly valued. These stocks are SCYNEXIS Inc (NASDAQ:SCYX), Super League Gaming, Inc. (NASDAQ:SLGG), Innodata Inc (NASDAQ:INOD), C&F Financial Corp (NASDAQ:CFFI), Bancroft Fund Limited (NYSE:BCV), USD Partners LP (NYSE:USDP), and Portman Ridge Finance Corporation (NASDAQ:PTMN). All of these stocks’ market caps resemble MRLN’s market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCYX,5,8863,-1 SLGG,2,642,1 INOD,4,7206,0 CFFI,2,5942,0 BCV,1,52,0 USDP,2,521,0 PTMN,9,4829,0 Average,3.6,4008,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $21 million in MRLN’s case. Portman Ridge Finance Corporation (NASDAQ:PTMN) is the most popular stock in this table. On the other hand Bancroft Fund Limited (NYSE:BCV) is the least popular one with only 1 bullish hedge fund positions. Marlin Business Services Corp. (NASDAQ:MRLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MRLN is 39.9. 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 gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on MRLN as the stock returned 68.9% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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