ARMOUR Residential REIT, Inc. (NYSE:ARR) investors should be aware of a decrease in hedge fund interest of late.
In the eyes of most investors, hedge funds are seen as underperforming, old financial vehicles of yesteryear. While there are over 8000 funds with their doors open today, we at Insider Monkey choose to focus on the bigwigs of this club, about 450 funds. It is widely believed that this group has its hands on most of all hedge funds’ total capital, and by watching their top picks, we have brought to light a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Equally as important, positive insider trading activity is another way to break down the financial markets. Obviously, there are a variety of motivations for a bullish insider to get rid of shares of his or her company, but just one, very simple reason why they would buy. Many academic studies have demonstrated the market-beating potential of this method if “monkeys” know where to look (learn more here).
Keeping this in mind, we’re going to take a peek at the key action regarding ARMOUR Residential REIT, Inc. (NYSE:ARR).
How are hedge funds trading ARMOUR Residential REIT, Inc. (NYSE:ARR)?
At the end of the fourth quarter, a total of 13 of the hedge funds we track held long positions in this stock, a change of -13% from the third quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully.
When looking at the hedgies we track, Balestra, managed by James Melcher, holds the biggest position in ARMOUR Residential REIT, Inc. (NYSE:ARR). Balestra has a $31.2 million position in the stock, comprising 10.7% of its 13F portfolio. On Balestra’s heels is SAB Capital Management, managed by Brian Jackelow, which held a $21.1 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Malcolm Fairbairn’s Ascend Capital.
Since ARMOUR Residential REIT, Inc. (NYSE:ARR) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies who were dropping their full holdings heading into 2013. Intriguingly, Keith Meister’s Corvex Capital said goodbye to the largest stake of the 450+ funds we watch, totaling close to $27.1 million in stock., and Michael Novogratz of Fortress Investment Group was right behind this move, as the fund dumped about $19.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into 2013.
What have insiders been doing with ARMOUR Residential REIT, Inc. (NYSE:ARR)?
Bullish insider trading is most useful when the company we’re looking at has seen transactions within the past six months. Over the latest six-month time period, ARMOUR Residential REIT, Inc. (NYSE:ARR) has experienced 5 unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity 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 resemble ARR’s market cap.