Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Two Harbors Investment Corp (NYSE:TWO) from the perspective of those elite funds.
Is Two Harbors Investment Corp (NYSE:TWO) going to take off soon? Prominent investors are turning bullish. The number of bullish hedge fund bets moved up by 2 recently. Our calculations also showed that two isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are seen as worthless, outdated investment tools of the past. While there are greater than 8000 funds trading at present, Our researchers choose to focus on the aristocrats of this group, approximately 750 funds. These hedge fund managers shepherd bulk of the smart money’s total capital, and by watching their first-class stock picks, Insider Monkey has unsheathed various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s go over the recent hedge fund action encompassing Two Harbors Investment Corp (NYSE:TWO).
What have hedge funds been doing with Two Harbors Investment Corp (NYSE:TWO)?
At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TWO over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Two Harbors Investment Corp (NYSE:TWO), with a stake worth $23.3 million reported as of the end of September. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $9.2 million. Millennium Management, Holocene Advisors, and Interval Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers were breaking ground themselves. Interval Partners, managed by Gregg Moskowitz, established the biggest position in Two Harbors Investment Corp (NYSE:TWO). Interval Partners had $1.6 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new TWO investors: Ray Dalio’s Bridgewater Associates, Matthew Hulsizer’s PEAK6 Capital Management, and David Harding’s Winton Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Two Harbors Investment Corp (NYSE:TWO) but similarly valued. These stocks are Weingarten Realty Investors (NYSE:WRI), Pluralsight, Inc. (NASDAQ:PS), Paylocity Holding Corp (NASDAQ:PCTY), and FirstCash, Inc. (NASDAQ:FCFS). All of these stocks’ market caps resemble TWO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WRI | 12 | 46342 | 1 |
| PS | 15 | 92526 | 2 |
| PCTY | 14 | 106409 | -8 |
| FCFS | 12 | 130903 | -4 |
| Average | 13.25 | 94045 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $45 million in TWO’s case. Pluralsight, Inc. (NASDAQ:PS) is the most popular stock in this table. On the other hand Weingarten Realty Investors (NYSE:WRI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Two Harbors Investment Corp (NYSE:TWO) is more popular among hedge funds. 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 TWO wasn’t nearly as popular as these 15 stock and hedge funds that were betting on TWO were disappointed as the stock returned 10.8% 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.
