We can judge whether Annaly Capital Management, Inc. (NYSE:NLY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Hedge fund interest in Annaly Capital Management, Inc. (NYSE:NLY) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NLY to other stocks including Hasbro, Inc. (NASDAQ:HAS), Chewy, Inc. (NYSE:CHWY), and Take-Two Interactive Software, Inc. (NASDAQ:TTWO) to get a better sense of its popularity. Our calculations also showed that NLY isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the fresh hedge fund action surrounding Annaly Capital Management, Inc. (NYSE:NLY).
What have hedge funds been doing with Annaly Capital Management, Inc. (NYSE:NLY)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in NLY over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest position in Annaly Capital Management, Inc. (NYSE:NLY), worth close to $82.9 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $28.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise George Soros’s Soros Fund Management, Dmitry Balyasny’s Balyasny Asset Management and Daniel Johnson’s Gillson Capital.
Judging by the fact that Annaly Capital Management, Inc. (NYSE:NLY) has experienced a decline in interest from the smart money, we can see that there lies a certain “tier” of money managers that elected to cut their entire stakes in the second quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors dropped the largest investment of all the hedgies watched by Insider Monkey, worth close to $25.8 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund dumped about $16.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Annaly Capital Management, Inc. (NYSE:NLY) but similarly valued. We will take a look at Hasbro, Inc. (NASDAQ:HAS), Chewy, Inc. (NYSE:CHWY), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), and Wayfair Inc (NYSE:W). This group of stocks’ market caps are closest to NLY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HAS | 24 | 383765 | 6 |
| CHWY | 38 | 621104 | 38 |
| TTWO | 60 | 1521405 | 10 |
| W | 32 | 2313806 | 2 |
| Average | 38.5 | 1210020 | 14 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $1210 million. That figure was $224 million in NLY’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Hasbro, Inc. (NASDAQ:HAS) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Annaly Capital Management, Inc. (NYSE:NLY) is even less popular than HAS. Hedge funds dodged a bullet by taking a bearish stance towards NLY. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NLY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NLY investors were disappointed as the stock returned -0.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
