At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Hedge fund interest in Apollo Commercial Real Est. Finance Inc (NYSE:ARI) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Rogers Corporation (NYSE:ROG), Clearwater Paper Corp (NYSE:CLW), and Irsa Inversiones y Rprsntcins SA (ADR) (NYSE:IRS) to gather more data points.
Follow Apollo Commercial Real Estate Finance Inc. (NYSE:ARI)
Follow Apollo Commercial Real Estate Finance Inc. (NYSE:ARI)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Keeping this in mind, we’re going to go over the key action regarding Apollo Commercial Real Est. Finance Inc (NYSE:ARI).
Hedge fund activity in Apollo Commercial Real Est. Finance Inc (NYSE:ARI)
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in ARI heading into this year. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Raiff Partners, led by Robert Raiff, holds the largest position in Apollo Commercial Real Est. Finance Inc (NYSE:ARI). Raiff Partners has a $2.5 million position in the stock, comprising 3.2% of its 13F portfolio. Coming in second is Noam Gottesman of GLG Partners, with a $1.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Cliff Asness’s AQR Capital Management, George Hall’s Clinton Group and Millennium Management, one of the 10 largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because Apollo Commercial Real Est. Finance Inc (NYSE:ARI) has weathered declining sentiment from the smart money, it’s safe to say that there is a sect of hedge funds who were dropping their entire stakes last quarter. Interestingly, Arthur Wrubel’s Wesley Capital Management cashed in the biggest stake of the 700 funds followed by Insider Monkey, comprising close to $8.8 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dumped about $5.8 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar to Apollo Commercial Real Est. Finance Inc (NYSE:ARI). We will take a look at Rogers Corporation (NYSE:ROG), Clearwater Paper Corp (NYSE:CLW), Irsa Inversiones y Rprsntcins SA (ADR) (NYSE:IRS), and Analogic Corporation (NASDAQ:ALOG). This group of stocks’ market values match ARI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROG | 19 | 110076 | 0 |
| CLW | 13 | 40595 | 1 |
| IRS | 12 | 89094 | -1 |
| ALOG | 9 | 98968 | -2 |
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 $85 million. That figure was $9 million in ARI’s case. Rogers Corporation (NYSE:ROG) is the most popular stock in this table. On the other hand Analogic Corporation (NASDAQ:ALOG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is even less popular than ALOG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
