Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
Is MFA Financial, Inc. (NYSE:MFA) a bargain? Investors who are in the know are turning bullish. The number of bullish hedge fund bets went up by 3 in recent months. MFA was in 17 hedge funds’ portfolios at the end of the third quarter of 2015. There were 14 hedge funds in our database with MFA positions at the end of the previous quarter. 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 Sunoco LP (NYSE:SUN), Golar LNG Limited (USA) (NASDAQ:GLNG), and The Wendy’s Company (NASDAQ:WEN) to gather more data points.
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With all of this in mind, let’s take a peek at the fresh action encompassing MFA Financial, Inc. (NYSE:MFA).
How have hedgies been trading MFA Financial, Inc. (NYSE:MFA)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the second quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in MFA Financial, Inc. (NYSE:MFA), worth close to $32.7 million, amounting to 0.2% of its total 13F portfolio. Coming in second is Cobalt Capital Management, managed by Wayne Cooperman, which holds a $5.9 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain John Overdeck and David Siegel’s Two Sigma Advisors, Charles Clough’s Clough Capital Partners and Jim Simons’ Renaissance Technologies.
Consequently, key hedge funds have jumped into MFA Financial, Inc. (NYSE:MFA) headfirst. Clough Capital Partners, managed by Charles Clough, assembled the most valuable position in MFA Financial, Inc. (NYSE:MFA). Clough Capital Partners had $2.4 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $2 million investment in the stock during the quarter. The following funds were also among the new MFA investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Jacob Gottlieb’s Visium Asset Management, and David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MFA Financial, Inc. (NYSE:MFA) but similarly valued. These stocks are Sunoco LP (NYSE:SUN), Golar LNG Limited (USA) (NASDAQ:GLNG), The Wendy’s Company (NASDAQ:WEN), and Avolon Holdings Ltd (NYSE:AVOL). This group of stocks’ market valuations resemble MFA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUN | 10 | 57436 | 0 |
| GLNG | 39 | 682454 | -5 |
| WEN | 26 | 632213 | -12 |
| AVOL | 12 | 185412 | -3 |
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $52 million in MFA’s case. Golar LNG Limited (USA) (NASDAQ:GLNG) is the most popular stock in this table. On the other hand Sunoco LP (NYSE:SUN) is the least popular one with only 10 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. In this regard GLNG might be a better candidate to consider a long position.
