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Hedge Funds Are Selling Western Asset Mortgage Capital Corp (WMC): Marlin Business Services Corp. (MRLN), Arlington Asset Investment Corp (AI)

Western Asset Mortgage Capital Corp (NYSE:WMC) was in 12 hedge funds’ portfolio at the end of the fourth quarter of 2012. WMC investors should be aware of a decrease in hedge fund interest lately. There were 18 hedge funds in our database with WMC positions at the end of the previous quarter.

Western Asset Mortgage Capital Corp (NYSE:WMC)To the average investor, there are a multitude of gauges investors can use to monitor the equity markets. A duo of the most under-the-radar are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a healthy margin (see just how much).

Just as beneficial, optimistic insider trading activity is a second way to parse down the world of equities. Obviously, there are many incentives for a bullish insider to cut shares of his or her company, but only one, very clear reason why they would buy. Various academic studies have demonstrated the valuable potential of this tactic if shareholders know what to do (learn more here).

Consequently, let’s take a gander at the latest action surrounding Western Asset Mortgage Capital Corp (NYSE:WMC).

How have hedgies been trading Western Asset Mortgage Capital Corp (NYSE:WMC)?

Heading into 2013, a total of 12 of the hedge funds we track were bullish in this stock, a change of -33% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes considerably.

When looking at the hedgies we track, Brian Jackelow’s SAB Capital Management had the most valuable position in Western Asset Mortgage Capital Corp (NYSE:WMC), worth close to $34 million, accounting for 4.9% of its total 13F portfolio. Coming in second is Pine River Capital Management, managed by Brian Taylor, which held a $20 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and James Melcher’s Balestra.

Seeing as Western Asset Mortgage Capital Corp (NYSE:WMC) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers who sold off their full holdings in Q4. Intriguingly, Keith Meister’s Corvex Capital cut the largest stake of all the hedgies we monitor, totaling close to $8 million in stock., and Ken Griffin of Citadel Investment Group was right behind this move, as the fund sold off about $5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds in Q4.

What do corporate executives and insiders think about Western Asset Mortgage Capital Corp (NYSE:WMC)?

Insider trading activity, especially when it’s bullish, is best served when the primary stock in question has seen transactions within the past six months. Over the last 180-day time frame, Western Asset Mortgage Capital Corp (NYSE:WMC) has seen 3 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Western Asset Mortgage Capital Corp (NYSE:WMC). These stocks are Marlin Business Services Corp. (NASDAQ:MRLN), Arlington Asset Investment Corp (NYSE:AI), HFF, Inc. (NYSE:HF), Hercules Technology Growth Capital Inc (NYSE:HTGC), and Ellington Financial LLC (NYSE:EFC). This group of stocks are in the mortgage investment industry and their market caps resemble WMC’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Marlin Business Services Corp. (NASDAQ:MRLN) 1 1 5
Arlington Asset Investment Corp (NYSE:AI) 6 0 0
HFF, Inc. (NYSE:HF) 3 0 1
Hercules Technology Growth Capital Inc (NYSE:HTGC) 5 0 0
Ellington Financial LLC (NYSE:EFC) 5 0 1

With the results exhibited by the aforementioned time-tested strategies, everyday investors should always watch hedge fund and insider trading sentiment, and Western Asset Mortgage Capital Corp (NYSE:WMC) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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