CYS Investments Inc (CYS): Are Hedge Funds Right About This Stock?

Is it smart to be bullish on CYS Investments Inc (NYSE:CYS)?

To many market players, hedge funds are viewed as useless, old investment vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds with their doors open today, Insider Monkey aim at the masters of this group, around 525 funds. Analysts calculate that this group has its hands on most of the hedge fund industry’s total capital, and by paying attention to their highest performing picks, we’ve deciphered a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year 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 outclassed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as key, optimistic insider trading activity is another way to look at the marketplace. As the old adage goes: there are plenty of stimuli for an upper level exec to downsize shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various empirical studies have demonstrated the impressive potential of this method if “monkeys” understand where to look (learn more here).

Keeping this in mind, it’s important to study the recent info about CYS Investments Inc (NYSE:CYS).

Hedge fund activity in CYS Investments Inc (NYSE:CYS)

Heading into Q3, a total of 11 of the hedge funds we track were bullish in this stock, a change of -15% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly.

According to our 13F database, Pine River Capital Management, managed by Brian Taylor, holds the biggest position in CYS Investments Inc (NYSE:CYS). Pine River Capital Management has a $61.1 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Cardinal Capital, managed by Amy Minella, which held a $45.5 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Some other peers that are bullish include Ken Griffin’s Citadel Investment Group, Charles Clough’s Clough Capital Partners and Nathaniel August’s Mangrove Partners.

Since CYS Investments Inc (NYSE:CYS) has witnessed bearish sentiment from the top-tier hedge fund industry, logic holds that there is a sect of hedge funds that elected to cut their full holdings last quarter. Interestingly, James Melcher’s Balestra dropped the largest investment of the 450+ funds we watch, totaling close to $26.7 million in stock, and Anand Parekh of Alyeska Investment Group was right behind this move, as the fund dropped about $7.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.

Insider trading activity in CYS Investments Inc (NYSE:CYS)

Insider buying made by high-level executives is at its handiest when the company in focus has experienced transactions within the past 180 days. Over the last six-month time period, CYS Investments Inc (NYSE:CYS) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to CYS Investments Inc (NYSE:CYS). These stocks are Hatteras Financial Corp. (NYSE:HTS), Post Properties Inc (NYSE:PPS), ARMOUR Residential REIT, Inc. (NYSE:ARR), Sun Communities Inc (NYSE:SUI), and Colonial Properties Trust Inc (NYSE:CLP). This group of stocks are in the reit – residential industry and their market caps resemble CYS’s market cap.