Here is What Hedge Funds Think About Chimera Investment Corporation (CIM)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Chimera Investment Corporation (NYSE:CIM) worth your attention right now? The best stock pickers are getting less bullish. The number of long hedge fund positions were trimmed by 1 in recent months. 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 Choice Hotels International, Inc. (NYSE:CHH), SouFun Holdings Ltd (NYSE:SFUN), and Home Bancshares Inc (NASDAQ:HOMB) to gather more data points.

To most shareholders, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers look at the upper echelon of this club, around 700 funds. It is estimated that this group of investors presides over the bulk of the smart money’s total capital, and by tracking their unrivaled investments, Insider Monkey has uncovered several investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to take a glance at the new action regarding Chimera Investment Corporation (NYSE:CIM).

What have hedge funds been doing with Chimera Investment Corporation (NYSE:CIM)?

Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 6% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Omega Advisors, managed by Leon Cooperman, holds the largest position in Chimera Investment Corporation (NYSE:CIM). Omega Advisors has a $188 million position in the stock, comprising 3.8% of its 13F portfolio. On Omega Advisors’s heels is Israel Englander of Millennium Management, with a $33.3 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital, Brian Taylor’s Pine River Capital Management, and Thomas G. Maheras’ Tegean Capital Management.

Due to the fact that Chimera Investment Corporation (NYSE:CIM) has faced a declination in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that slashed their full holdings heading into Q4. At the top of the heap, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling close to $25.7 million in stock, and Joseph A. Jolson’s Harvest Capital Strategies was right behind this move, as the fund cut about $1.3 million worth of shares. These moves are interesting, as total hedge fund interest was cut by 1 fund heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Chimera Investment Corporation (NYSE:CIM) but similarly valued. We will take a look at Choice Hotels International, Inc. (NYSE:CHH), SouFun Holdings Ltd (NYSE:SFUN), Home Bancshares Inc (NASDAQ:HOMB), and Southwest Gas Corporation (NYSE:SWX). This group of stocks’ market values matches Chimera Investment Corporation (NYSE:CIM)’s market value.

As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $291 million in Chimera Investment Corporation (NYSE:CIM)’s case. SouFun Holdings Ltd (NYSE:SFUN) is the most popular stock in this table. On the other hand, Choice Hotels International, Inc. (NYSE:CHH) is the least popular one with only 12 bullish hedge fund positions. Chimera Investment Corporation (NYSE:CIM) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SouFun Holdings Ltd (NYSE:SFUN) might be a better candidate to consider a long position.