Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of NewStar Financial Inc (NASDAQ:NEWS) and see how the stock is affected by the recent hedge fund activity.
Is NewStar Financial Inc (NASDAQ:NEWS) a buy right now? Investors who are in the know are getting more optimistic. The number of bullish hedge fund bets went up by 1 in recent months. NEWS was in 8 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with NEWS holdings at the end of the previous quarter. 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 Resource Capital Corp. (NYSE:RSO), Univest Corp. of PA (NASDAQ:UVSP), and Cliffs Natural Resources Inc (NYSE:CLF) to gather more data points.
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To the average investor there are dozens of signals stock market investors use to evaluate publicly traded companies. A duo of the most useful signals are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outpace the market by a solid amount (see the details here).
With all of this in mind, we’re going to take a gander at the latest action encompassing NewStar Financial Inc (NASDAQ:NEWS).
How have hedgies been trading NewStar Financial Inc (NASDAQ:NEWS)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increse of 14% from the second quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Corsair Capital LLC, managed by D.T. Ignacio Jayanti, holds the biggest position in NewStar Financial Inc (NASDAQ:NEWS). In its latest 13F report, the fund has disclosed a $78.2 million position in the stock, comprising 19.7% of its 13F portfolio. The second most bullish fund manager is Second Curve Capital, led by Tom Brown, holding a $20.6 million position; the fund has 9.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Stewart Strawbridge’s Selkirk Management, William Black’s Consector Capital and D. E. Shaw’s D E Shaw.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, established the biggest position in NewStar Financial Inc (NASDAQ:NEWS), worth an estimated $0.2 million at the end of the quarter.
Let’s check out hedge fund activity in other stocks similar to NewStar Financial Inc (NASDAQ:NEWS). These stocks are Resource Capital Corp. (NYSE:RSO), Univest Corp. of PA (NASDAQ:UVSP), Cliffs Natural Resources Inc (NYSE:CLF), and A10 Networks Inc (NYSE:ATEN). All of these stocks’ market caps are similar to NEWS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RSO | 7 | 7715 | -4 |
| UVSP | 5 | 6205 | -1 |
| CLF | 17 | 56372 | -2 |
| ATEN | 14 | 31137 | 4 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was a whooping $109 million in NEWS’s case. Cliffs Natural Resources Inc (NYSE:CLF) is the most popular stock in this table. On the other hand Univest Corp. of PA (NASDAQ:UVSP) is the least popular one with only 5 bullish hedge fund positions. NewStar Financial Inc (NASDAQ:NEWS) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CLF might be a better candidate to consider a long position.
