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 second 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 Capstead Mortgage Corporation (NYSE:CMO) based on that data.
Is Capstead Mortgage Corporation (NYSE:CMO) a safe investment today? Investors who are in the know were in a bullish mood. The number of bullish hedge fund bets went up by 2 recently. Capstead Mortgage Corporation (NYSE:CMO) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 15. Our calculations also showed that CMO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 8 hedge funds in our database with CMO holdings at the end of March.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 best EV 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 we’re going to analyze the fresh hedge fund action encompassing Capstead Mortgage Corporation (NYSE:CMO).
Do Hedge Funds Think CMO Is A Good Stock To Buy Now?
At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in CMO a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Capstead Mortgage Corporation (NYSE:CMO) was held by Paradice Investment Management, which reported holding $25 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $6.9 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Capstead Mortgage Corporation (NYSE:CMO), around 1.16% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to CMO.
As one would reasonably expect, key hedge funds were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the biggest position in Capstead Mortgage Corporation (NYSE:CMO). Tudor Investment Corp had $0.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.1 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Capstead Mortgage Corporation (NYSE:CMO). These stocks are Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), Eagle Bulk Shipping Inc. (NASDAQ:EGLE), Digital Media Solutions, Inc. (NYSE:DMS), SunCoke Energy, Inc (NYSE:SXC), Viomi Technology Co., Ltd (NASDAQ:VIOT), The York Water Company (NASDAQ:YORW), and Peapack-Gladstone Financial Corp (NASDAQ:PGC). This group of stocks’ market caps match CMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPRX | 16 | 92123 | 3 |
| EGLE | 25 | 278891 | 13 |
| DMS | 4 | 803 | -5 |
| SXC | 19 | 83738 | -3 |
| VIOT | 4 | 2355 | -2 |
| YORW | 7 | 15104 | 3 |
| PGC | 14 | 50659 | 1 |
| Average | 12.7 | 74810 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $42 million in CMO’s case. Eagle Bulk Shipping Inc. (NASDAQ:EGLE) is the most popular stock in this table. On the other hand Digital Media Solutions, Inc. (NYSE:DMS) is the least popular one with only 4 bullish hedge fund positions. Capstead Mortgage Corporation (NYSE:CMO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CMO is 41.3. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. A small number of hedge funds were also right about betting on CMO as the stock returned 11.9% since the end of the second quarter (through 9/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
