Capstead Mortgage Corporation (CMO), Investors Real Estate Trust (IRET): This Metric Says You Are Smart to Buy Crexus Investment Corp (CXS)

Crexus Investment Corp (NYSE:CXS) was in 17 hedge funds’ portfolio at the end of December. CXS investors should be aware of an increase in enthusiasm from smart money lately. There were 8 hedge funds in our database with CXS positions at the end of the previous quarter.

According to most investors, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are greater than 8000 funds trading at present, we look at the crème de la crème of this club, about 450 funds. It is widely believed that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by watching their highest performing picks, we have discovered a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as beneficial, bullish insider trading sentiment is another way to parse down the marketplace. Obviously, there are plenty of motivations for an upper level exec to get rid of shares of his or her company, but only one, very simple reason why they would buy. Various academic studies have demonstrated the valuable potential of this tactic if shareholders understand where to look (learn more here).

With these “truths” under our belt, let’s take a glance at the latest action surrounding Crexus Investment Corp (NYSE:CXS).

What have hedge funds been doing with Crexus Investment Corp (NYSE:CXS)?

At the end of the fourth quarter, a total of 17 of the hedge funds we track were long in this stock, a change of 113% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes substantially.

Of the funds we track, Paulson & Co, managed by John Paulson, holds the largest position in Crexus Investment Corp (NYSE:CXS). Paulson & Co has a $29.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Vertex One Asset Management, managed by John Thiessen, which held a $11 million position; 2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Cliff Asness’s AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management.

As one would reasonably expect, key money managers were breaking ground themselves. Paulson & Co, managed by John Paulson, created the most valuable position in Crexus Investment Corp (NYSE:CXS). Paulson & Co had 29.4 million invested in the company at the end of the quarter. John Thiessen’s Vertex One Asset Management also made a $11 million investment in the stock during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Brian Taylor’s Pine River Capital Management.

How are insiders trading Crexus Investment Corp (NYSE:CXS)?

Bullish insider trading is most useful when the company in question has seen transactions within the past 180 days. Over the latest six-month time frame, Crexus Investment Corp (NYSE:CXS) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Crexus Investment Corp (NYSE:CXS). These stocks are Capstead Mortgage Corporation (NYSE:CMO), Investors Real Estate Trust (NYSE:IRET), Cousins Properties Inc (NYSE:CUZ), Anworth Mortgage Asset Corporation (NYSE:ANH), and iStar Financial Inc. (NYSE:SFI). This group of stocks belong to the reit – diversified industry and their market caps match CXS’s market cap.