The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Walter Investment Management Corp (NYSE:WAC) .
Walter Investment Management Corp (NYSE:WAC) shareholders have witnessed an increase in hedge fund interest of late. WAC was in 9 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with WAC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as New York & Company, Inc. (NYSE:NWY), Radio One, Inc. (NASDAQ:ROIAK), and Ocean Shore Holding Co (NASDAQ:OSHC) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Now, let’s review the recent action regarding Walter Investment Management Corp (NYSE:WAC).
What does the smart money think about Walter Investment Management Corp (NYSE:WAC)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, growth of 29% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in WAC at the beginning of this year. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Vadim Perelman’s Baker Street Capital has the biggest position in Walter Investment Management Corp (NYSE:WAC), worth close to $35.2 million, accounting for 100% of its total 13F portfolio. On Baker Street Capital’s heels is Birch Run Capital, led by Daniel Beltzman and Gergory Smith, holding a $30.3 million position; the fund has 11.5% of its 13F portfolio invested in the stock. Other peers that are bullish consist of William C. Martin’s Raging Capital Management, Nick Niell’s Arrowgrass Capital Partners and Mark T. Gallogly’s Centerbridge Partners. We should note that Raging Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, key money managers have jumped into Walter Investment Management Corp (NYSE:WAC) headfirst. Arrowgrass Capital Partners established the most valuable position in Walter Investment Management Corp (NYSE:WAC). Arrowgrass Capital Partners had $3.2 million invested in the company at the end of the quarter. Centerbridge Partners also initiated a $0.5 million position during the quarter. The only other fund with a brand new WAC position is Renaissance Technologies,one of the largest hedge funds in the world.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Walter Investment Management Corp (NYSE:WAC) but similarly valued. These stocks are New York & Company, Inc. (NYSE:NWY), Radio One, Inc. (NASDAQ:ROIAK), Ocean Shore Holding Co (NASDAQ:OSHC), and Kopin Corporation (NASDAQ:KOPN). This group of stocks’ market values match WAC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWY | 9 | 16281 | -1 |
| ROIAK | 4 | 16371 | -2 |
| OSHC | 3 | 4213 | -3 |
| KOPN | 2 | 5352 | -2 |
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $84 million in WAC’s case. New York & Company, Inc. (NYSE:NWY) is the most popular stock in this table. On the other hand Kopin Corporation (NASDAQ:KOPN) is the least popular one with only 2 bullish hedge fund positions. Walter Investment Management Corp (NYSE:WAC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NWY might be a better candidate to consider taking a long position in.
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