“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards New Residential Investment Corp (NYSE:NRZ) and see how it was affected.
Is New Residential Investment Corp (NYSE:NRZ) an exceptional stock to buy now? The best stock pickers are taking an optimistic view. The number of bullish hedge fund positions advanced by 3 in recent months. Our calculations also showed that NRZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most traders, hedge funds are assumed to be unimportant, outdated investment tools of years past. While there are greater than 8000 funds trading at present, We hone in on the top tier of this club, approximately 750 funds. Most estimates calculate that this group of people watch over the lion’s share of the hedge fund industry’s total asset base, and by monitoring their best investments, Insider Monkey has come up with many investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Michael Hintze of CQS Cayman LP
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the key hedge fund action encompassing New Residential Investment Corp (NYSE:NRZ).
How have hedgies been trading New Residential Investment Corp (NYSE:NRZ)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NRZ over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in New Residential Investment Corp (NYSE:NRZ) was held by Balyasny Asset Management, which reported holding $58.4 million worth of stock at the end of September. It was followed by Capital Growth Management with a $24.3 million position. Other investors bullish on the company included Whitebox Advisors, Alyeska Investment Group, and CQS Cayman LP. In terms of the portfolio weights assigned to each position Swift Run Capital Management allocated the biggest weight to New Residential Investment Corp (NYSE:NRZ), around 2.28% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, setting aside 1.86 percent of its 13F equity portfolio to NRZ.
With a general bullishness amongst the heavyweights, specific money managers have jumped into New Residential Investment Corp (NYSE:NRZ) headfirst. CQS Cayman LP, managed by Michael Hintze, created the most outsized position in New Residential Investment Corp (NYSE:NRZ). CQS Cayman LP had $6.3 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also made a $4.1 million investment in the stock during the quarter. The following funds were also among the new NRZ investors: Christopher C. Grisanti’s Grisanti Brown & Partners, Peter Muller’s PDT Partners, and Minhua Zhang’s Weld Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as New Residential Investment Corp (NYSE:NRZ) but similarly valued. These stocks are The Gap Inc. (NYSE:GPS), The Middleby Corporation (NASDAQ:MIDD), Dolby Laboratories, Inc. (NYSE:DLB), and HD Supply Holdings Inc (NASDAQ:HDS). This group of stocks’ market valuations are similar to NRZ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPS | 25 | 148276 | 4 |
| MIDD | 23 | 348030 | -4 |
| DLB | 27 | 538773 | 0 |
| HDS | 33 | 965472 | 3 |
| Average | 27 | 500138 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $142 million in NRZ’s case. HD Supply Holdings Inc (NASDAQ:HDS) is the most popular stock in this table. On the other hand The Middleby Corporation (NASDAQ:MIDD) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks New Residential Investment Corp (NYSE:NRZ) is even less popular than MIDD. Hedge funds dodged a bullet by taking a bearish stance towards NRZ. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NRZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NRZ investors were disappointed as the stock returned 2.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
