Walter Investment Management Corp (NYSE:WAC) investors should pay attention to a decrease in enthusiasm from smart money in recent months.
In the eyes of most market participants, hedge funds are assumed to be slow, old investment vehicles of years past. While there are greater than 8000 funds trading today, we look at the top tier of this group, about 450 funds. It is widely believed that this group controls the majority of the smart money's total asset base, and by keeping an eye on their highest performing investments, we have determined a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Equally as important, optimistic insider trading activity is a second way to parse down the financial markets. Just as you'd expect, there are lots of reasons for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would buy. Various academic studies have demonstrated the valuable potential of this strategy if you understand what to do (learn more here).
Now, let's take a glance at the latest action surrounding Walter Investment Management Corp (NYSE:WAC).
In preparation for this quarter, a total of 20 of the hedge funds we track held long positions in this stock, a change of -13% from the first quarter.
Judging by the fact that Walter Investment Management Corp (NYSE:WAC) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies that slashed their full holdings heading into Q2. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management dumped the largest stake of the 450+ funds we monitor, totaling close to $424.4 million in stock. Donald Chiboucis's fund, Columbus Circle Investors, also said goodbye to its stock, about $25.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q2.
Insider buying is best served when the primary stock in question has seen transactions within the past 180 days. Over the latest 180-day time period, Walter Investment Management Corp (NYSE:WAC) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Walter Investment Management Corp (NYSE:WAC). These stocks are Invesco Mortgage Capital Inc (NYSE:IVR), HFF, Inc. (NYSE:HF), KKR Financial Holdings LLC (NYSE:KFN), Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), and Home Loan Servicing Solutions Ltd (NASDAQ:HLSS). This group of stocks are in the mortgage investment industry and their market caps are closest to WAC's market cap.