If you were to ask many market players, hedge funds are assumed to be delayed, outdated financial tools of a period lost to current times. Although there are over 8,000 hedge funds with their doors open in present day, Insider Monkey focuses on the aristocrats of this club, about 525 funds. It is widely held that this group controls the majority of the hedge fund industry's total capital, and by tracking their highest quality stock picks, we've figured out a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Equally as useful, bullish insider trading sentiment is a second way to analyze the stock market universe. Just as you'd expect, there are plenty of stimuli for an executive to cut shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this strategy if investors know what to do (learn more here).
Thus, we're going to study the latest info for ARMOUR Residential REIT, Inc. (NYSE:ARR).
At Q2's end, a total of 11 of the hedge funds we track were long in this stock, a change of 0% from one quarter earlier. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably.
Out of the hedge funds we follow, Pine River Capital Management, managed by Brian Taylor, holds the largest position in ARMOUR Residential REIT, Inc. (NYSE:ARR). Pine River Capital Management has a $49.1 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by Corvex Capital, managed by Keith Meister, which held a $13.5 million position; 0.3% of its 13F portfolio is allocated to the company. Other peers that are bullish include Nathaniel August's Mangrove Partners, Ken Griffin's Citadel Investment Group and Cliff Asness's AQR Capital Management.
As ARMOUR Residential REIT, Inc. (NYSE:ARR) has experienced a fall in interest from upper-tier hedge fund managers, logic holds that there were a few money managers who were dropping their entire stakes heading into Q2. It's worth mentioning that J. Alan Reid, Jr.'s Forward Management sold off the largest investment of the 450+ funds we watch, worth about $0.5 million in stock, and David Costen Haley of HBK Investments was right behind this move, as the fund dumped about $0.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Bullish insider trading is at its handiest when the company we're looking at has experienced transactions within the past six months. Over the latest half-year time frame, ARMOUR Residential REIT, Inc. (NYSE:ARR) has experienced zero unique insiders purchasing, 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 ARMOUR Residential REIT, Inc. (NYSE:ARR). These stocks are Colonial Properties Trust Inc (NYSE:CLP), Mid America Apartment Communities Inc (NYSE:MAA), CYS Investments Inc (NYSE:CYS), Hatteras Financial Corp. (NYSE:HTS), and Post Properties Inc (NYSE:PPS). This group of stocks belong to the reit - residential industry and their market caps are similar to ARR's market cap.