The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded MFA Financial, Inc. (NYSE:MFA) based on those filings.
Is MFA Financial, Inc. (NYSE:MFA) a safe investment now? Investors who are in the know are selling. The number of bullish hedge fund bets decreased by 3 recently. Our calculations also showed that MFA 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 large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_189632" align="aligncenter" width="392"] David Harding of Winton Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's view the latest hedge fund action encompassing MFA Financial, Inc. (NYSE:MFA).
Hedge fund activity in MFA Financial, Inc. (NYSE:MFA)
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in MFA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in MFA Financial, Inc. (NYSE:MFA), which was worth $11.1 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $5.5 million worth of shares. Winton Capital Management, D E Shaw, 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 Winton Capital Management allocated the biggest weight to MFA Financial, Inc. (NYSE:MFA), around 0.11% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to MFA.
Since MFA Financial, Inc. (NYSE:MFA) has faced declining sentiment from hedge fund managers, logic holds that there were a few hedgies that elected to cut their positions entirely by the end of the first quarter. It's worth mentioning that Renaissance Technologies said goodbye to the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at close to $19.1 million in stock. Robert Henry Lynch's fund, Aristeia Capital, also cut its stock, about $2.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the first quarter.
Let's now take a look at 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 Ovintiv Inc. (NYSE:OVV), Cytokinetics, Inc. (NASDAQ:CYTK), International Seaways, Inc. (NYSE:INSW), and Talend S.A. (NASDAQ:TLND). This group of stocks' market caps are closest to MFA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OVV,19,27099,-4 CYTK,22,206499,2 INSW,27,169817,5 TLND,29,332515,5 Average,24.25,183983,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $26 million in MFA's case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand Ovintiv Inc. (NYSE:OVV) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks MFA Financial, Inc. (NYSE:MFA) is even less popular than OVV. Hedge funds clearly dropped the ball on MFA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on MFA as the stock returned 61.9% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.