The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at MFA Financial, Inc. (NYSE:MFA) from the perspective of those elite funds.
MFA Financial, Inc. (NYSE:MFA) was in 14 hedge funds’ portfolios at the end of the third quarter of 2018. MFA has seen an increase in support from the world’s most elite money managers of late. There were 13 hedge funds in our database with MFA holdings at the end of the previous quarter. Our calculations also showed that mfa isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the latest hedge fund action regarding MFA Financial, Inc. (NYSE:MFA).
How have hedgies been trading MFA Financial, Inc. (NYSE:MFA)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MFA over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of MFA Financial, Inc. (NYSE:MFA), with a stake worth $74.6 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $66.3 million. Millennium Management, Blue Mountain Capital, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Ellington, managed by Mike Vranos, created the most valuable position in MFA Financial, Inc. (NYSE:MFA). Ellington had $9.2 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $6.9 million investment in the stock during the quarter. The following funds were also among the new MFA investors: Benjamin A. Smith’s Laurion Capital Management and Roger Ibbotson’s Zebra Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to MFA Financial, Inc. (NYSE:MFA). We will take a look at Emergent Biosolutions Inc (NYSE:EBS), Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), Ellie Mae Inc (NYSE:ELLI), and Guangshen Railway Co. Ltd (NYSE:GSH). This group of stocks’ market values resemble MFA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBS | 16 | 219005 | 4 |
| MDGL | 26 | 575763 | 5 |
| ELLI | 15 | 613258 | 2 |
| GSH | 1 | 4749 | 0 |
| Average | 14.5 | 353194 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $353 million. That figure was $289 million in MFA’s case. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 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 MDGL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
