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Capstead Mortgage Corporation (CMO): Are Hedge Funds Right About This Stock?

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Is Capstead Mortgage Corporation (NYSE:CMO) the right investment to pursue these days? Prominent investors are in a bearish mood. The number of long hedge fund bets shrunk by 1 in recent months.

Capstead Mortgage Corporation (NYSE:CMO)

In the eyes of most traders, hedge funds are viewed as slow, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open at the moment, we hone in on the crème de la crème of this club, about 450 funds. It is widely believed that this group controls the lion’s share of the hedge fund industry’s total capital, and by monitoring their top picks, we have revealed a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as key, bullish insider trading activity is a second way to break down the financial markets. There are many incentives for a corporate insider to drop shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the impressive potential of this tactic if investors know what to do (learn more here).

Keeping this in mind, we’re going to take a glance at the key action encompassing Capstead Mortgage Corporation (NYSE:CMO).

Hedge fund activity in Capstead Mortgage Corporation (NYSE:CMO)

At Q1’s end, a total of 11 of the hedge funds we track were long in this stock, a change of -8% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully.

Of the funds we track, Ken Griffin’s Citadel Investment Group had the largest position in Capstead Mortgage Corporation (NYSE:CMO), worth close to $18.3 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is George Soros of Soros Fund Management, with a $6.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.

Due to the fact that Capstead Mortgage Corporation (NYSE:CMO) has experienced falling interest from hedge fund managers, it’s easy to see that there exists a select few fund managers who sold off their entire stakes at the end of the first quarter. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the biggest stake of all the hedgies we key on, worth close to $0.2 million in call options. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds at the end of the first quarter.

Insider trading activity in Capstead Mortgage Corporation (NYSE:CMO)

Insider purchases made by high-level executives is best served when the primary stock in question has seen transactions within the past half-year. Over the latest 180-day time frame, Capstead Mortgage Corporation (NYSE:CMO) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Capstead Mortgage Corporation (NYSE:CMO). These stocks are American Capital Mortgage Investment Crp (NASDAQ:MTGE), Crexus Investment Corp (NYSE:CXS), Colony Financial Inc (NYSE:CLNY), Cousins Properties Inc (NYSE:CUZ), and Investors Real Estate Trust (NYSE:IRET). This group of stocks are in the reit – diversified industry and their market caps match CMO’s market cap.

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