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 MFA Financial, Inc. (NYSE:MFA).
MFA Financial, Inc. (NYSE:MFA) has seen an increase in hedge fund sentiment lately. Our calculations also showed that MFA 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 take a gander at the fresh hedge fund action regarding MFA Financial, Inc. (NYSE:MFA).
What does smart money think about MFA Financial, Inc. (NYSE:MFA)?
At Q2’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in MFA a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of MFA Financial, Inc. (NYSE:MFA), with a stake worth $47.9 million reported as of the end of March. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $30.4 million. Two Sigma Advisors, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, created the biggest position in MFA Financial, Inc. (NYSE:MFA). Laurion Capital Management had $1.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $0.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital and Claes Fornell’s CSat Investment Advisory.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MFA Financial, Inc. (NYSE:MFA) but similarly valued. These stocks are FTI Consulting, Inc. (NYSE:FCN), Novanta Inc. (NASDAQ:NOVT), Viavi Solutions Inc (NASDAQ:VIAV), and Extended Stay America Inc (NASDAQ:STAY). All of these stocks’ market caps are similar to MFA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCN | 17 | 128300 | 0 |
| NOVT | 13 | 70468 | -4 |
| VIAV | 22 | 293123 | -6 |
| STAY | 28 | 495473 | -4 |
| Average | 20 | 246841 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $103 million in MFA’s case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand Novanta Inc. (NASDAQ:NOVT) is the least popular one with only 13 bullish hedge fund positions. MFA Financial, Inc. (NYSE:MFA) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on MFA, though not to the same extent, as the stock returned 5.3% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
