Is Capstead Mortgage Corporation (CMO) Going to Burn These Hedge Funds?

Should Capstead Mortgage Corporation (NYSE:CMO) investors track the following data?

In the financial world, there are plenty of metrics investors can use to track publicly traded companies. A pair of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the top investment managers can trounce the market by a significant amount (see just how much).

Just as necessary, positive insider trading activity is a second way to analyze the world of equities. As the old adage goes: there are lots of reasons for a corporate insider to drop shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this method if you know where to look (learn more here).

Keeping this in mind, we’re going to analyze the recent info surrounding Capstead Mortgage Corporation (NYSE:CMO).

Hedge fund activity in Capstead Mortgage Corporation (NYSE:CMO)

Heading into Q3, a total of 7 of the hedge funds we track held long positions in this stock, a change of -36% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly.

According to our 13F database, Ken Griffin’s Citadel Investment Group had the largest position in Capstead Mortgage Corporation (NYSE:CMO), worth close to $21 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Mangrove Partners, managed by Nathaniel August, which held a $3 million position; 1.3% of its 13F portfolio is allocated to the company. Remaining hedgies that hold long positions include Cliff Asness’s AQR Capital Management, Matthew Hulsizer’s PEAK6 Capital Management and Robert B. Gillam’s McKinley Capital Management.

As Capstead Mortgage Corporation (NYSE:CMO) has experienced a fall in interest from the smart money’s best and brightest, logic holds that there is a sect of fund managers that slashed their full holdings last quarter. At the top of the heap, George Soros’s Soros Fund Management dropped the biggest stake of the “upper crust” of funds we monitor, valued at an estimated $6.8 million in stock. Jim Simons’s fund, Renaissance Technologies, also said goodbye to its stock, about $1.9 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.

How have insiders been trading Capstead Mortgage Corporation (NYSE:CMO)?

Insider buying made by high-level executives is best served when the company in focus has seen transactions within the past six months. Over the last half-year time frame, Capstead Mortgage Corporation (NYSE:CMO) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Capstead Mortgage Corporation (NYSE:CMO). These stocks are American Capital Mortgage Investment Crp (NASDAQ:MTGE), Crexus Investment Corp (NYSE:CXS), Colony Financial Inc (NYSE:CLNY), Cousins Properties Inc (NYSE:CUZ), and Investors Real Estate Trust (NYSE:IRET). All of these stocks are in the reit – diversified industry and their market caps resemble CMO’s market cap.

Using the returns demonstrated by the previously mentioned studies, average investors must always watch hedge fund and insider trading activity, and Capstead Mortgage Corporation (NYSE:CMO) is no exception.

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