The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Two Harbors Investment Corp (NYSE:TWO) and determine whether the smart money was really smart about this stock.
Two Harbors Investment Corp (NYSE:TWO) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. TWO has seen an increase in support from the world’s most elite money managers lately. There were 30 hedge funds in our database with TWO holdings at the end of June. Our calculations also showed that TWO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks 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. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Two Harbors Investment Corp (NYSE:TWO).
Jeffrey Tannenbaum of Fir Tree
Do Hedge Funds Think TWO Is A Good Stock To Buy Now?
At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in TWO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the largest position in Two Harbors Investment Corp (NYSE:TWO), worth close to $28 million, comprising 0.1% of its total 13F portfolio. On Two Sigma Advisors’s heels is Sculptor Capital, led by Jimmy Levin, holding a $17.5 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism consist of Ken Griffin’s Citadel Investment Group, Jeffrey Tannenbaum’s Fir Tree and Paul Glazer’s Glazer Capital. In terms of the portfolio weights assigned to each position Centiva Capital allocated the biggest weight to Two Harbors Investment Corp (NYSE:TWO), around 0.62% of its 13F portfolio. Fir Tree is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to TWO.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in Two Harbors Investment Corp (NYSE:TWO). Millennium Management had $1.9 million invested in the company at the end of the quarter. Andy Redleaf’s Whitebox Advisors also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new TWO investors: D. E. Shaw’s D E Shaw, Andrew Weiss’s Weiss Asset Management, and Donald Sussman’s Paloma Partners.
Let’s now take a look at hedge fund activity in other stocks similar to Two Harbors Investment Corp (NYSE:TWO). These stocks are Oasis Petroleum Inc. (NASDAQ:OAS), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), Equinox Gold Corp. (NYSE:EQX), HUYA Inc. (NYSE:HUYA), Columbia Financial, Inc. (NASDAQ:CLBK), Stagwell Inc. (NASDAQ:STGW), and Latham Group Inc. (NASDAQ:SWIM). All of these stocks’ market caps resemble TWO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OAS | 19 | 224452 | -4 |
| FLWS | 18 | 61856 | -6 |
| EQX | 13 | 56083 | -3 |
| HUYA | 11 | 22547 | 0 |
| CLBK | 10 | 49128 | -1 |
| STGW | 10 | 111580 | 10 |
| SWIM | 10 | 69466 | 10 |
| Average | 13 | 85016 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $156 million in TWO’s case. Oasis Petroleum Inc. (NASDAQ:OAS) is the most popular stock in this table. On the other hand Columbia Financial, Inc. (NASDAQ:CLBK) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Two Harbors Investment Corp (NYSE:TWO) is more popular among hedge funds. Our overall hedge fund sentiment score for TWO is 85.1. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, TWO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TWO were disappointed as the stock returned -6.7% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Two Harbors Investment Corp. (NYSE:TWO)
Follow Two Harbors Investment Corp. (NYSE:TWO)
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Disclosure: None. This article was originally published at Insider Monkey.
