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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Two Harbors Investment Corp (NYSE:TWO).
Two Harbors Investment Corp (NYSE:TWO) was in 24 hedge funds' portfolios at the end of the first quarter of 2020. TWO has experienced an increase in support from the world's most elite money managers recently. There were 20 hedge funds in our database with TWO holdings at the end of the previous quarter. Our calculations also showed that TWO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a multitude of indicators investors use to size up their holdings. A duo of the less utilized indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a superb margin (see the details here).
[caption id="attachment_88925" align="aligncenter" width="397"] Bill Miller of Miller Value Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a glance at the latest hedge fund action regarding Two Harbors Investment Corp (NYSE:TWO).
How have hedgies been trading Two Harbors Investment Corp (NYSE:TWO)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TWO over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Two Harbors Investment Corp (NYSE:TWO) was held by Lakewood Capital Management, which reported holding $9.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $5.7 million position. Other investors bullish on the company included Winton Capital Management, Balyasny Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to Two Harbors Investment Corp (NYSE:TWO), around 0.5% of its 13F portfolio. Lakewood Capital Management is also relatively very bullish on the stock, setting aside 0.44 percent of its 13F equity portfolio to TWO.
Now, specific money managers have been driving this bullishness. Lakewood Capital Management, managed by Anthony Bozza, established the biggest position in Two Harbors Investment Corp (NYSE:TWO). Lakewood Capital Management had $9.5 million invested in the company at the end of the quarter. Bill Miller's Miller Value Partners also initiated a $1.7 million position during the quarter. The other funds with brand new TWO positions are Israel Englander's Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Kenneth Tropin's Graham Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Two Harbors Investment Corp (NYSE:TWO). We will take a look at Cedar Fair, L.P. (NYSE:FUN), Chart Industries, Inc. (NASDAQ:GTLS), Huron Consulting Group Inc. (NASDAQ:HURN), and Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB). All of these stocks' market caps are closest to TWO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FUN,10,29631,1 GTLS,21,120048,2 HURN,17,57403,3 YMAB,11,98663,-1 Average,14.75,76436,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $32 million in TWO's case. Chart Industries, Inc. (NASDAQ:GTLS) is the most popular stock in this table. On the other hand Cedar Fair, L.P. (NYSE:FUN) 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on TWO as the stock returned 44.9% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.