We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of New Residential Investment Corp (NYSE:NRZ) based on that data.
New Residential Investment Corp (NYSE:NRZ) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Vishay Intertechnology (NYSE:VSH), Simmons First National Corporation (NASDAQ:SFNC), and Diodes Incorporated (NASDAQ:DIOD) to gather more data points. Our calculations also showed that NRZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are several indicators stock market investors put to use to evaluate their holdings. Two of the most under-the-radar indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the broader indices by a healthy amount (see the details here).
Steven Cohen of Point72 Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding New Residential Investment Corp (NYSE:NRZ).
How are hedge funds trading New Residential Investment Corp (NYSE:NRZ)?
Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in NRZ a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Steve Cohen’s Point72 Asset Management has the number one position in New Residential Investment Corp (NYSE:NRZ), worth close to $4.8 million, amounting to less than 0.1%% of its total 13F portfolio. On Point72 Asset Management’s heels is Millennium Management, led by Israel Englander, holding a $4.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Josh Donfeld and David Rogers’s Castle Hook Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Swift Run Capital Management allocated the biggest weight to New Residential Investment Corp (NYSE:NRZ), around 0.58% of its 13F portfolio. Castle Hook Partners is also relatively very bullish on the stock, earmarking 0.36 percent of its 13F equity portfolio to NRZ.
Judging by the fact that New Residential Investment Corp (NYSE:NRZ) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of money managers that slashed their entire stakes by the end of the first quarter. Interestingly, Renaissance Technologies said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $33.2 million in stock, and Ken Heebner’s Capital Growth Management was right behind this move, as the fund said goodbye to about $29.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as New Residential Investment Corp (NYSE:NRZ) but similarly valued. These stocks are Vishay Intertechnology (NYSE:VSH), Simmons First National Corporation (NASDAQ:SFNC), Diodes Incorporated (NASDAQ:DIOD), and DouYu International Holdings Limited (NASDAQ:DOYU). All of these stocks’ market caps resemble NRZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VSH | 23 | 266555 | 3 |
| SFNC | 4 | 2712 | -2 |
| DIOD | 13 | 49641 | -5 |
| DOYU | 15 | 30200 | 9 |
| Average | 13.75 | 87277 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $28 million in NRZ’s case. Vishay Intertechnology (NYSE:VSH) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only 4 bullish hedge fund positions. New Residential Investment Corp (NYSE:NRZ) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on NRZ as the stock returned 59.8% in Q2 (through June 10th) 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.
