Is Northstar Realty Finance Corp. (NYSE:NRF) an outstanding investment today? The best stock pickers are getting more optimistic. The number of long hedge fund bets moved up by 11 recently.
In the eyes of most shareholders, hedge funds are assumed to be slow, old financial tools of years past. While there are over 8000 funds in operation today, we hone in on the leaders of this club, close to 450 funds. Most estimates calculate that this group controls the lion's share of all hedge funds' total capital, and by watching their highest performing equity investments, we have determined a few investment strategies that have historically outstripped 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 outperformed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Equally as key, bullish insider trading activity is a second way to break down the investments you're interested in. Just as you'd expect, there are lots of stimuli for a bullish insider to drop shares of his or her company, but only one, very clear reason why they would buy. Many academic studies have demonstrated the market-beating potential of this method if "monkeys" know where to look (learn more here).
With these "truths" under our belt, let's take a gander at the latest action encompassing Northstar Realty Finance Corp. (NYSE:NRF).
At the end of the fourth quarter, a total of 19 of the hedge funds we track were long in this stock, a change of 138% from one quarter earlier. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably.
Of the funds we track, Brookside Capital, managed by Bain Capital, holds the most valuable position in Northstar Realty Finance Corp. (NYSE:NRF). Brookside Capital has a $43 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Anand Parekh of Alyeska Investment Group, with a $34 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other peers with similar optimism include Steven Cohen's SAC Capital Advisors, Jim Simons's Renaissance Technologies and Malcolm Fairbairn's Ascend Capital.
As one would reasonably expect, specific money managers were leading the bulls' herd. Brookside Capital, managed by Bain Capital, established the biggest position in Northstar Realty Finance Corp. (NYSE:NRF). Brookside Capital had 43 million invested in the company at the end of the quarter. Steven Cohen's SAC Capital Advisors also made a $21 million investment in the stock during the quarter. The other funds with new positions in the stock are Malcolm Fairbairn's Ascend Capital, Cliff Asness's AQR Capital Management, and Bruce Kovner's Caxton Associates LP.
Insider trading activity, especially when it's bullish, is particularly usable when the company in question has seen transactions within the past half-year. Over the last 180-day time period, Northstar Realty Finance Corp. (NYSE:NRF) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
With the returns shown by the aforementioned research, retail investors should always keep an eye on hedge fund and insider trading activity, and Northstar Realty Finance Corp. (NYSE:NRF) shareholders fit into this picture quite nicely.
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