We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Northstar Realty Finance Corp. (NYSE:NRF), and what that likely means for the prospects of the company and its stock.
Northstar Realty Finance Corp. (NYSE:NRF)’s shares haven’t seen a lot of action during the third quarter. Overall, the hedge fund sentiment was unchanged and the stock was included in the equity portfolios of 32 funds from our database at the end of September. At the end of this article we will also compare NRF to other stocks including Boyd Gaming Corporation (NYSE:BYD), Artisan Partners Asset Management Inc (NYSE:APAM), and Verint Systems Inc. (NASDAQ:VRNT) to get a better sense of its popularity.
Follow Northstar Realty Finance Corp. (NYSE:NRF)
Follow Northstar Realty Finance Corp. (NYSE:NRF)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s view the key action surrounding Northstar Realty Finance Corp. (NYSE:NRF).
How are hedge funds trading Northstar Realty Finance Corp. (NYSE:NRF)?
As stated earlier, heading into the fourth quarter of 2016, 32 funds tracked by Insider Monkey held long positions in this stock, unchanged over the quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Mashaal’s Rima Senvest Management has the largest position in Northstar Realty Finance Corp. (NYSE:NRF), worth close to $76.5 million, amounting to 5.5% of its total 13F portfolio. The second largest stake is held by Seth Klarman’s Baupost Group, with a $72.4 million position; the fund has 1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of David Abrams’ Abrams Capital Management, Wayne Cooperman’s Cobalt Capital Management, and Philip Hempleman’s Ardsley Partners.
On the other hand, a number of investors decided to unload their entire stakes in Northstar Realty Finance Corp. (NYSE:NRF) during the third quarter. James Dondero’s Highland Capital Management said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, valued at an estimated $5.4 million in stock. Scott Lawrence Swid’s fund, SLS Management, also dropped its stock, about $3.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Northstar Realty Finance Corp. (NYSE:NRF) but similarly valued. We will take a look at Boyd Gaming Corporation (NYSE:BYD), Artisan Partners Asset Management Inc (NYSE:APAM), Verint Systems Inc. (NASDAQ:VRNT), and Bloomin’ Brands Inc (NASDAQ:BLMN). This group of stocks’ market values resemble NRF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BYD | 23 | 667524 | -4 |
| APAM | 10 | 94947 | -1 |
| VRNT | 21 | 294430 | 0 |
| BLMN | 21 | 104326 | -2 |
As you can see these stocks had an average of 19 funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $315 million in NRF’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Artisan Partners Asset Management Inc (NYSE:APAM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Northstar Realty Finance Corp. (NYSE:NRF) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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