We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Anworth Mortgage Asset Corporation (NYSE:ANH).
Anworth Mortgage Asset Corporation (NYSE:ANH) has seen an increase in hedge fund interest in recent months. ANH was in 14 hedge funds’ portfolios at the end of June. There were 9 hedge funds in our database with ANH positions at the end of the previous quarter. Our calculations also showed that ANH isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let’s take a peek at the fresh hedge fund action encompassing Anworth Mortgage Asset Corporation (NYSE:ANH).
Hedge fund activity in Anworth Mortgage Asset Corporation (NYSE:ANH)
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 56% from the first quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in ANH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Anworth Mortgage Asset Corporation (NYSE:ANH) was held by Renaissance Technologies, which reported holding $24.5 million worth of stock at the end of March. It was followed by Almitas Capital with a $1.7 million position. Other investors bullish on the company included Millennium Management, Blue Mountain Capital, and Two Sigma Advisors.
As industrywide interest jumped, some big names have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most valuable position in Anworth Mortgage Asset Corporation (NYSE:ANH). Two Sigma Advisors had $0.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new ANH investors: Minhua Zhang’s Weld Capital Management, Michael Gelband’s ExodusPoint Capital, and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks similar to Anworth Mortgage Asset Corporation (NYSE:ANH). We will take a look at Spirit MTA REIT (NYSE:SMTA), Health Insurance Innovations Inc (NASDAQ:HIIQ), The Container Store Group, Inc. (NYSE:TCS), and Diana Shipping Inc. (NYSE:DSX). This group of stocks’ market valuations are similar to ANH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMTA | 19 | 112723 | -2 |
| HIIQ | 19 | 130570 | -3 |
| TCS | 18 | 23709 | 6 |
| DSX | 9 | 23161 | 1 |
| Average | 16.25 | 72541 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $31 million in ANH’s case. Spirit MTA REIT (NYSE:SMTA) is the most popular stock in this table. On the other hand Diana Shipping Inc. (NYSE:DSX) is the least popular one with only 9 bullish hedge fund positions. Anworth Mortgage Asset Corporation (NYSE:ANH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ANH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ANH investors were disappointed as the stock returned -10.4% 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.
