Should I Buy MFA Financial, Inc. (MFA)?

In this article we will take a look at whether hedge funds think MFA Financial, Inc. (NYSE:MFA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is MFA Financial, Inc. (NYSE:MFA) the right pick for your portfolio? The best stock pickers were becoming more confident. The number of bullish hedge fund bets went up by 4 recently. MFA Financial, Inc. (NYSE:MFA) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 22. Our calculations also showed that MFA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bill Miller of Miller Value Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s go over the key hedge fund action regarding MFA Financial, Inc. (NYSE:MFA).

Do Hedge Funds Think MFA Is A Good Stock To Buy Now?

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in MFA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of MFA Financial, Inc. (NYSE:MFA), with a stake worth $29.2 million reported as of the end of June. Trailing Arrowstreet Capital was Two Sigma Advisors, which amassed a stake valued at $24.2 million. Millennium Management, LMR Partners, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beach Point Capital Management allocated the biggest weight to MFA Financial, Inc. (NYSE:MFA), around 1.81% of its 13F portfolio. Beach Point Capital Management is also relatively very bullish on the stock, designating 1.69 percent of its 13F equity portfolio to MFA.

As aggregate interest increased, specific money managers have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the most valuable position in MFA Financial, Inc. (NYSE:MFA). LMR Partners had $14.6 million invested in the company at the end of the quarter. Bill Miller’s Miller Value Partners also initiated a $3.6 million position during the quarter. The following funds were also among the new MFA investors: Michael Gelband’s ExodusPoint Capital, Anand Parekh’s Alyeska Investment Group, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MFA Financial, Inc. (NYSE:MFA) but similarly valued. We will take a look at Velodyne Lidar, Inc. (NASDAQ:VLDR), PROS Holdings, Inc. (NYSE:PRO), Ouster, Inc. (NYSE:OUST), Deluxe Corporation (NYSE:DLX), Compass Minerals International, Inc. (NYSE:CMP), Oasis Petroleum Inc. (NASDAQ:OAS), and Seer, Inc. (NASDAQ:SEER). This group of stocks’ market caps resemble MFA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $151 million in MFA’s case. Oasis Petroleum Inc. (NASDAQ:OAS) is the most popular stock in this table. On the other hand Deluxe Corporation (NYSE:DLX) is the least popular one with only 11 bullish hedge fund positions. MFA Financial, Inc. (NYSE:MFA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MFA is 73.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on MFA as the stock returned 3.5% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.