Newcastle Investment Corp. (NCT): Hedge Funds and Insiders Are Bullish, What Should You Do?

Is Newcastle Investment Corp. (NYSE:NCT) a healthy stock for your portfolio? The smart money is getting more bullish. The number of bullish hedge fund positions went up by 17 lately.

At the moment, there are many methods investors can use to analyze Mr. Market. Two of the most underrated are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce their index-focused peers by a healthy amount (see just how much).

Equally as integral, optimistic insider trading sentiment is a second way to parse down the world of equities. Obviously, there are lots of incentives for an upper level exec to downsize shares of his or her company, but only one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the valuable potential of this method if you know where to look (learn more here).

Keeping this in mind, let’s take a gander at the latest action surrounding Newcastle Investment Corp. (NYSE:NCT).

How are hedge funds trading Newcastle Investment Corp. (NYSE:NCT)?

Heading into Q2, a total of 39 of the hedge funds we track were long in this stock, a change of 77% from the first quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably.

Of the funds we track, SAC Capital Advisors, managed by Steven Cohen, holds the most valuable position in Newcastle Investment Corp. (NYSE:NCT). SAC Capital Advisors has a $69.8 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is James Dinan of York Capital Management, with a $66.7 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include John Osterweis’s Osterweis Capital Management, Malcolm Fairbairn’s Ascend Capital and Leon Cooperman’s Omega Advisors.

As industrywide interest jumped, specific money managers were breaking ground themselves. York Capital Management, managed by James Dinan, established the largest position in Newcastle Investment Corp. (NYSE:NCT). York Capital Management had 66.7 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also made a $62.2 million investment in the stock during the quarter. The following funds were also among the new NCT investors: Neil Chriss’s Hutchin Hill Capital, Robert Joseph Caruso’s Select Equity Group, and Howard Guberman’s Gruss Asset Management.

What have insiders been doing with Newcastle Investment Corp. (NYSE:NCT)?

Bullish insider trading is best served when the company in focus has experienced transactions within the past half-year. Over the latest 180-day time frame, Newcastle Investment Corp. (NYSE:NCT) has seen 2 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Newcastle Investment Corp. (NYSE:NCT). These stocks are Douglas Emmett, Inc. (NYSE:DEI), Retail Properties of America Inc (NYSE:RPAI), MFA Financial, Inc. (NYSE:MFA), Chimera Investment Corporation (NYSE:CIM), and Lexington Realty Trust (NYSE:LXP). All of these stocks are in the reit – diversified industry and their market caps resemble NCT’s market cap.

With the returns demonstrated by the aforementioned strategies, retail investors must always watch hedge fund and insider trading activity, and Newcastle Investment Corp. (NYSE:NCT) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds