Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Invesco Mortgage Capital Inc (NYSE:IVR) to find out whether it was one of their high conviction long-term ideas.
Is Invesco Mortgage Capital Inc (NYSE:IVR) a buy right now? The smart money is in an optimistic mood. The number of long hedge fund bets improved by 2 recently. Our calculations also showed that ivr isn't among the 30 most popular stocks among hedge funds. IVR was in 13 hedge funds' portfolios at the end of December. There were 11 hedge funds in our database with IVR holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to analyze the recent hedge fund action regarding Invesco Mortgage Capital Inc (NYSE:IVR).
What does the smart money think about Invesco Mortgage Capital Inc (NYSE:IVR)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in IVR a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Invesco Mortgage Capital Inc (NYSE:IVR), which was worth $11.4 million at the end of the fourth quarter. On the second spot was Balyasny Asset Management which amassed $8.2 million worth of shares. Moreover, AQR Capital Management, Holocene Advisors, and McKinley Capital Management were also bullish on Invesco Mortgage Capital Inc (NYSE:IVR), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the largest position in Invesco Mortgage Capital Inc (NYSE:IVR). Balyasny Asset Management had $8.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves's BlueCrest Capital Mgmt., D. E. Shaw's D E Shaw, and Andrew Weiss's Weiss Asset Management.
Let's now review hedge fund activity in other stocks similar to Invesco Mortgage Capital Inc (NYSE:IVR). We will take a look at CNOOC Limited (NYSE:CEO), Provident Financial Services, Inc. (NYSE:PFS), Solaredge Technologies Inc (NASDAQ:SEDG), and Cohen & Steers, Inc. (NYSE:CNS). This group of stocks' market caps resemble IVR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CEO,15,265499,0 PFS,8,51876,0 SEDG,14,50613,0 CNS,8,47029,-1 Average,11.25,103754,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $27 million in IVR's case. CNOOC Limited (NYSE:CEO) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 8 bullish hedge fund positions. Invesco Mortgage Capital Inc (NYSE:IVR) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately IVR wasn't nearly as popular as these 15 stock and hedge funds that were betting on IVR were disappointed as the stock returned 15.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.