Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Capstead Mortgage Corporation (NYSE:CMO) a buy, sell, or hold? Prominent investors are taking a bullish view. The number of long hedge fund positions moved up by 4 recently. Our calculations also showed that cmo isn’t among the 30 most popular stocks among hedge funds.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.
We’re going to take a gander at the latest hedge fund action encompassing Capstead Mortgage Corporation (NYSE:CMO).
What have hedge funds been doing with Capstead Mortgage Corporation (NYSE:CMO)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 57% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMO over the last 14 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, HBK Investments was the largest shareholder of Capstead Mortgage Corporation (NYSE:CMO), with a stake worth $17.3 million reported as of the end of December. Trailing HBK Investments was Renaissance Technologies, which amassed a stake valued at $16.9 million. Weiss Asset Management, Citadel Investment Group, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds have jumped into Capstead Mortgage Corporation (NYSE:CMO) headfirst. HBK Investments, managed by David Costen Haley, created the largest position in Capstead Mortgage Corporation (NYSE:CMO). HBK Investments had $17.3 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $1.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Bruce Kovner’s Caxton Associates LP, and Ron Mass’s Almitas Capital.
Let’s go over hedge fund activity in other stocks similar to Capstead Mortgage Corporation (NYSE:CMO). We will take a look at Essential Properties Realty Trust, Inc. (NYSE:EPRT), Byline Bancorp, Inc. (NYSE:BY), Horizon Bancorp, Inc. (NASDAQ:HBNC), and Flushing Financial Corporation (NASDAQ:FFIC). This group of stocks’ market caps are closest to CMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPRT | 13 | 104932 | -3 |
| BY | 6 | 20476 | 2 |
| HBNC | 6 | 16821 | 0 |
| FFIC | 7 | 40961 | -1 |
| Average | 8 | 45798 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $52 million in CMO’s case. Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the most popular stock in this table. On the other hand Byline Bancorp, Inc. (NYSE:BY) is the least popular one with only 6 bullish hedge fund positions. Capstead Mortgage Corporation (NYSE:CMO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CMO as the stock returned 30.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
