Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Ellington Financial Inc. (NYSE:EFC) based on that data.
Is Ellington Financial Inc. (NYSE:EFC) a buy here? The smart money was in a pessimistic mood. The number of long hedge fund positions fell by 3 lately. Ellington Financial Inc. (NYSE:EFC) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 12. Our calculations also showed that EFC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Leon Cooperman of Omega Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $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 gander at the new hedge fund action surrounding Ellington Financial Inc. (NYSE:EFC).
Do Hedge Funds Think EFC Is A Good Stock To Buy Now?
At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EFC over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Mike Vranos’s Ellington has the biggest position in Ellington Financial Inc. (NYSE:EFC), worth close to $13.6 million, accounting for 1.7% of its total 13F portfolio. On Ellington’s heels is Omega Advisors, led by Leon Cooperman, holding a $12.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Israel Englander’s Millennium Management, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Ellington allocated the biggest weight to Ellington Financial Inc. (NYSE:EFC), around 1.68% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, setting aside 0.76 percent of its 13F equity portfolio to EFC.
Because Ellington Financial Inc. (NYSE:EFC) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few funds that decided to sell off their entire stakes heading into Q2. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $1.6 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund cut about $0.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds heading into Q2.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ellington Financial Inc. (NYSE:EFC) but similarly valued. These stocks are ChannelAdvisor Corp (NYSE:ECOM), Shift Technologies, Inc. (NASDAQ:SFT), ViewRay, Inc. (NASDAQ:VRAY), Gossamer Bio, Inc. (NASDAQ:GOSS), Ethan Allen Interiors Inc. (NYSE:ETH), Qutoutiao Inc. (NASDAQ:QTT), and Tian Ruixiang Holdings Ltd (NASDAQ:TIRX). This group of stocks’ market values are closest to EFC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ECOM | 12 | 76490 | -3 |
| SFT | 13 | 79004 | 2 |
| VRAY | 18 | 154229 | 4 |
| GOSS | 19 | 158211 | -1 |
| ETH | 13 | 45423 | -1 |
| QTT | 4 | 2833 | 1 |
| TIRX | 1 | 763 | 1 |
| Average | 11.4 | 73850 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $39 million in EFC’s case. Gossamer Bio, Inc. (NASDAQ:GOSS) is the most popular stock in this table. On the other hand Tian Ruixiang Holdings Ltd (NASDAQ:TIRX) is the least popular one with only 1 bullish hedge fund positions. Ellington Financial Inc. (NYSE:EFC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EFC is 30.9. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on EFC as the stock returned 23.3% since the end of the first quarter (through 6/25) and outperformed the market by an even larger margin.
Follow Ellington Financial Inc. (NYSE:EFC)
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Disclosure: None. This article was originally published at Insider Monkey.
