Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ recent losses in Facebook. Let’s take a closer look at what the funds we track think about MFA Financial, Inc. (NYSE:MFA) in this article.
Is MFA Financial, Inc. (NYSE:MFA) a healthy stock for your portfolio? Prominent investors are getting more bullish. The number of long hedge fund bets inched up by 4 recently. Our calculations also showed that MFA isn’t among the 30 most popular stocks among hedge funds. MFA was in 18 hedge funds’ portfolios at the end of December. There were 14 hedge funds in our database with MFA holdings at the end of the previous quarter.
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 32 percentage points since May 2014 through March 12, 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.
We’re going to take a glance at the latest hedge fund action encompassing MFA Financial, Inc. (NYSE:MFA).
Hedge fund activity in MFA Financial, Inc. (NYSE:MFA)
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the second quarter of 2018. 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 sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in MFA Financial, Inc. (NYSE:MFA) was held by Citadel Investment Group, which reported holding $56.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $50.3 million position. Other investors bullish on the company included Blue Mountain Capital, Two Sigma Advisors, and Balyasny Asset Management.
Now, specific money managers have been driving this bullishness. Almitas Capital, managed by Ron Mass, assembled the biggest position in MFA Financial, Inc. (NYSE:MFA). Almitas Capital had $7.5 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also made a $2.8 million investment in the stock during the quarter. The following funds were also among the new MFA investors: Minhua Zhang’s Weld Capital Management, David Costen Haley’s HBK Investments, and Jeffrey Talpins’s Element Capital Management.
Let’s now review hedge fund activity in other stocks similar to MFA Financial, Inc. (NYSE:MFA). These stocks are Sprouts Farmers Market Inc (NASDAQ:SFM), Intelsat S.A. (NYSE:I), NorthWestern Corporation (NYSE:NWE), and Intercept Pharmaceuticals Inc (NASDAQ:ICPT). This group of stocks’ market caps resemble MFA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFM | 22 | 305953 | 3 |
| I | 42 | 946955 | 5 |
| NWE | 15 | 160177 | 0 |
| ICPT | 21 | 150563 | 2 |
| Average | 25 | 390912 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $391 million. That figure was $177 million in MFA’s case. Intelsat S.A. (NYSE:I) is the most popular stock in this table. On the other hand NorthWestern Corporation (NYSE:NWE) is the least popular one with only 15 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. 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 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. Unfortunately MFA wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); MFA investors were disappointed as the stock returned 13.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
