CapitalSource, Inc. (CSE): Are Hedge Funds Right About This Stock?

CapitalSource, Inc. (NYSE:CSE) was in 15 hedge funds’ portfolio at the end of the first quarter of 2013. CSE has experienced a decrease in support from the world’s most elite money managers recently. There were 15 hedge funds in our database with CSE positions at the end of the previous quarter.

In today’s marketplace, there are a multitude of methods investors can use to watch Mr. Market. A pair of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the S&P 500 by a significant amount (see just how much).

Just as important, positive insider trading sentiment is a second way to parse down the marketplace. Obviously, there are lots of motivations for an executive to downsize shares of his or her company, but just one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the valuable potential of this strategy if piggybackers know what to do (learn more here).

Keeping this in mind, we’re going to take a glance at the recent action regarding CapitalSource, Inc. (NYSE:CSE).

Hedge fund activity in CapitalSource, Inc. (NYSE:CSE)

In preparation for this quarter, a total of 15 of the hedge funds we track held long positions in this stock, a change of 0% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially.

When looking at the hedgies we track, Cardinal Capital, managed by Amy Minella, holds the biggest position in CapitalSource, Inc. (NYSE:CSE). Cardinal Capital has a $54.2 million position in the stock, comprising 3.4% of its 13F portfolio. Sitting at the No. 2 spot is Pine River Capital Management, managed by Brian Taylor, which held a $19.9 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.

Since CapitalSource, Inc. (NYSE:CSE) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that elected to cut their positions entirely heading into Q2. Interestingly, Howard Guberman’s Gruss Asset Management dropped the largest investment of all the hedgies we track, comprising about $14.4 million in stock., and Robert Millard of Realm Partners was right behind this move, as the fund dumped about $0.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What do corporate executives and insiders think about CapitalSource, Inc. (NYSE:CSE)?

Insider trading activity, especially when it’s bullish, is best served when the company we’re looking at has experienced transactions within the past 180 days. Over the latest 180-day time frame, CapitalSource, Inc. (NYSE:CSE) has seen zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to CapitalSource, Inc. (NYSE:CSE). These stocks are PHH Corporation (NYSE:PHH), Credit Acceptance Corp. (NASDAQ:CACC), Cash America International, Inc. (NYSE:CSH), Nelnet, Inc. (NYSE:NNI), and First Cash Financial Services, Inc. (NASDAQ:FCFS). This group of stocks are in the credit services industry and their market caps match CSE’s market cap.