Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Hatteras Financial Corp. (NYSE:HTS) worth your attention right now? Hedge funds are selling. The number of bullish hedge fund positions fell by 4 lately. At the end of this article we will also compare HTS to other stocks including WNS (Holdings) Limited (ADR) (NYSE:WNS), Alon USA Partners LP (NYSE:ALDW), and Meritage Homes Corp (NYSE:MTH) to get a better sense of its popularity.
Follow Hatteras Financial Corp (NYSE:HTS)
Follow Hatteras Financial Corp (NYSE:HTS)
Keeping this in mind, we’re going to take a look at the fresh action encompassing Hatteras Financial Corp. (NYSE:HTS).
What does the smart money think about Hatteras Financial Corp. (NYSE:HTS)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Hatteras Financial Corp. (NYSE:HTS). Citadel Investment Group has a $23.8 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second largest stake is held by Nathaniel August of Mangrove Partners, with a $22.7 million position; 5.2% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions contain Dmitry Balyasny’s Balyasny Asset Management, Jim Simons’s Renaissance Technologies and Matthew Hulsizer’s PEAK6 Capital Management.
Because Hatteras Financial Corp. (NYSE:HTS) has experienced falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies who were dropping their positions entirely by the end of the third quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $4.6 million in stock. Stephen Feinberg’s fund, Cerberus Capital Management, also said goodbye to its stock, about $1.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hatteras Financial Corp. (NYSE:HTS) but similarly valued. We will take a look at WNS (Holdings) Limited (ADR) (NYSE:WNS), Alon USA Partners LP (NYSE:ALDW), Meritage Homes Corp (NYSE:MTH), and Nektar Therapeutics (NASDAQ:NKTR). This group of stocks’ market valuations are closest to HTS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WNS | 11 | 67417 | 3 |
| ALDW | 5 | 10783 | 2 |
| MTH | 13 | 198090 | -1 |
| NKTR | 11 | 92427 | -10 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $102 million in HTS’s case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Alon USA Partners LP (NYSE:ALDW) is the least popular one with only 5 bullish hedge fund positions. Hatteras Financial Corp. (NYSE:HTS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MTH might be a better candidate to consider a long position.
