Hedge Funds Are Betting On Starwood Waypoint Residential Trust (SWAY)

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Starwood Waypoint Residential Trust (NYSE:SWAY) has experienced an increase in hedge fund interest of late. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Solaredge Technologies Inc (NASDAQ:SEDG), Clearwater Paper Corp (NYSE:CLW), and Scientific Games Corp (NASDAQ:SGMS) to gather more data points.

According to most shareholders, hedge funds are perceived as unimportant, old investment vehicles of years past. While there are more than 8000 funds with their doors open at the moment, Our experts look at the crème de la crème of this club, about 700 funds. These investment experts shepherd most of all hedge funds’ total capital, and by keeping track of their unrivaled equity investments, Insider Monkey has found several investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s go over the latest action encompassing Starwood Waypoint Residential Trust (NYSE:SWAY).

Hedge fund activity in Starwood Waypoint Residential Trust (NYSE:SWAY)

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 29% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, EJF Capital, run by Emanuel J. Friedman, holds the most valuable position in Starwood Waypoint Residential Trust (NYSE:SWAY). The fund reportedly holds an $86.2 million position in the stock, comprising 4.2% of its 13F portfolio. Sitting at the No. 2 spot is John Khoury of Long Pond Capital, with a $74.6 million position; 3.2% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise Amy Minella’s Cardinal Capital, David S. Winter and David J. Millstone’s 40 North Management and Ken Griffin’s Citadel Investment Group.

Now, key hedge funds have jumped into Starwood Waypoint Residential Trust (NYSE:SWAY) headfirst. Waterfront Capital Partners, managed by Eduardo Abush, created the most outsized position in Starwood Waypoint Residential Trust (NYSE:SWAY). According to its latest 13F filing, the fund had $5.4 million invested in the company at the end of the quarter. Brian Jackelow’s SAB Capital Management also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies and Sander Gerber’s Hudson Bay Capital Management.

Let’s now review hedge fund activity in other stocks similar to Starwood Waypoint Residential Trust (NYSE:SWAY). We will take a look at Solaredge Technologies Inc (NASDAQ:SEDG), Clearwater Paper Corp (NYSE:CLW), Scientific Games Corp (NASDAQ:SGMS), and Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP). All of these stocks’ market caps match SWAY’s market cap.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $297 million in SWAY’s case. Scientific Games Corp (NASDAQ:SGMS) is the most popular stock in this table, while Clearwater Paper Corp (NYSE:CLW) is at the other end of the specter with only 12 bullish hedge fund positions. Starwood Waypoint Residential Trust (NYSE:SWAY) 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. In this regard SGMS might be a better candidate to consider a long position.