Is Hatteras Financial Corp. (NYSE:HTS) the right pick for your portfolio? Prominent investors are turning less bullish. The number of long hedge fund bets dropped by 2 recently.
In the financial world, there are tons of metrics investors can use to track Mr. Market. A couple of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the best money managers can outpace the S&P 500 by a significant margin (see just how much).
Just as important, optimistic insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are many reasons for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Plenty of academic studies have demonstrated the impressive potential of this method if “monkeys” know where to look (learn more here).
Keeping this in mind, let’s take a look at the key action regarding Hatteras Financial Corp. (NYSE:HTS).
How have hedgies been trading Hatteras Financial Corp. (NYSE:HTS)?
Heading into 2013, a total of 10 of the hedge funds we track were long in this stock, a change of -17% from the third quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably.
Of the funds we track, Bill Miller’s Legg Mason Capital Management had the biggest position in Hatteras Financial Corp. (NYSE:HTS), worth close to $12 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $11 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds that are bullish include Andy Redleaf’s Whitebox Advisors, Israel Englander’s Millennium Management and Louis Bacon’s Moore Global Investments.
Seeing as Hatteras Financial Corp. (NYSE:HTS) has experienced falling interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that Amy Minella’s Cardinal Capital dropped the biggest position of all the hedgies we track, comprising an estimated $18 million in stock.. Charles Clough’s fund, Clough Capital Partners, also dropped its stock, about $10 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.
Insider trading activity in Hatteras Financial Corp. (NYSE:HTS)
Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past six months. Over the last half-year time period, Hatteras Financial Corp. (NYSE:HTS) has seen 3 unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Hatteras Financial Corp. (NYSE:HTS). These stocks are Home Properties, Inc. (NYSE:HME), Equity Lifestyle Properties, Inc. (NYSE:ELS), ARMOUR Residential REIT, Inc. (NYSE:ARR), Mid America Apartment Communities Inc (NYSE:MAA), and Post Properties Inc (NYSE:PPS). All of these stocks are in the reit – residential industry and their market caps are closest to HTS’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Home Properties, Inc. (NYSE:HME)||8||1||10|
|Equity Lifestyle Properties, Inc. (NYSE:ELS)||10||0||4|
|ARMOUR Residential REIT, Inc. (NYSE:ARR)||13||5||0|
|Mid America Apartment Communities Inc (NYSE:MAA)||7||0||0|
|Post Properties Inc (NYSE:PPS)||10||0||5|
With the returns exhibited by our studies, retail investors should always pay attention to hedge fund and insider trading activity, and Hatteras Financial Corp. (NYSE:HTS) is an important part of this process.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.