iStar Financial Inc. (NYSE:SFI): Insiders Are Buying, Should You?

iStar Financial Inc. (NYSE:SFI) has seen a decrease in enthusiasm from smart money in recent months.

To most investors, hedge funds are seen as worthless, old investment vehicles of yesteryear. While there are more than 8000 funds trading today, we look at the upper echelon of this group, close to 450 funds. It is estimated that this group oversees the lion’s share of all hedge funds’ total capital, and by keeping an eye on their best investments, we have identified a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Just as key, optimistic insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are plenty of motivations for a bullish insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this tactic if shareholders understand what to do (learn more here).

Now, let’s take a peek at the recent action encompassing iStar Financial Inc. (NYSE:SFI).

What have hedge funds been doing with iStar Financial Inc. (NYSE:SFI)?

At the end of the fourth quarter, a total of 20 of the hedge funds we track held long positions in this stock, a change of -17% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably.

Of the funds we track, Valinor Management LLC, managed by David Gallo, holds the largest position in iStar Financial Inc. (NYSE:SFI). Valinor Management LLC has a $43 million position in the stock, comprising 1.8% of its 13F portfolio. The second largest stake is held by Diamond Hill Capital, managed by Ric Dillon, which held a $38 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers that are bullish include Mark T. Gallogly’s Centerbridge Partners, Lee Ainslie’s Maverick Capital and Robert Jaffe’s Force Capital.

Seeing as iStar Financial Inc. (NYSE:SFI) has faced a declination in interest from the smart money, it’s safe to say that there were a few hedge funds who sold off their entire stakes at the end of the year. Intriguingly, Roberto Mignone’s Bridger Management sold off the biggest stake of all the hedgies we track, comprising about $13 million in stock., and Shane Finemore of Manikay Partners was right behind this move, as the fund said goodbye to about $10 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds at the end of the year.

What do corporate executives and insiders think about iStar Financial Inc. (NYSE:SFI)?

Insider purchases made by high-level executives is at its handiest when the company we’re looking at has experienced transactions within the past six months. Over the last 180-day time period, iStar Financial Inc. (NYSE:SFI) has seen 1 unique insiders buying, and 2 insider sales (see the details of insider trades here).

With the results exhibited by Insider Monkey’s research, retail investors must always watch hedge fund and insider trading sentiment, and iStar Financial Inc. (NYSE:SFI) is an important part of this process.

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