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Should You Avoid MFA Financial, Inc. (NYSE:MFA)?: Newcastle Investment Corp. (NYSE:NCT), Starwood Property Trust, Inc. (NYSE:STWD)

MFA Financial, Inc. (NYSE:MFA) has seen a decrease in hedge fund interest of late.

In today’s marketplace, there are tons of indicators shareholders can use to monitor their holdings. A duo of the most innovative are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the top investment managers can outclass the broader indices by a healthy margin (see just how much).

Equally as beneficial, optimistic insider trading sentiment is another way to break down the stock market universe. There are plenty of incentives for an insider to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the useful potential of this strategy if you know what to do (learn more here).

With these “truths” under our belt, it’s important to take a glance at the key action surrounding MFA Financial, Inc. (NYSE:MFA).

Hedge fund activity in MFA Financial, Inc. (NYSE:MFA)

In preparation for this year, a total of 15 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably.

According to our comprehensive database, Pine River Capital Management, managed by Brian Taylor, holds the most valuable position in MFA Financial, Inc. (NYSE:MFA). Pine River Capital Management has a $31 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is James Melcher of Balestra, with a $30 million position; 10.4% of its 13F portfolio is allocated to the stock. Other hedgies that hold long positions include Carl Goldsmith and Scott Klein’s Beach Point Capital Management, David Tepper’s Appaloosa Management LP and Ken Griffin’s Citadel Investment Group.

Because MFA Financial, Inc. (NYSE:MFA) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers who sold off their entire stakes heading into 2013. Interestingly, D. E. Shaw’s D Hedge Funds Lose Big After United States Steel Corp Dropped 7.62%E Shaw dropped the largest position of the 450+ funds we monitor, comprising an estimated $1 million in stock., and Steven Cohen of SAC Capital Advisors was right behind this move, as the fund dropped about $1 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with MFA Financial, Inc. (NYSE:MFA)?

Insider buying is most useful when the company in question has seen transactions within the past 180 days. Over the last half-year time frame, MFA Financial, Inc. (NYSE:MFA) has seen 6 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to MFA Financial, Inc. (NYSE:MFA). These stocks are Newcastle Investment Corp. (NYSE:NCT), Starwood Property Trust, Inc. (NYSE:STWD), Douglas Emmett, Inc. (NYSE:DEI), Retail Properties of America Inc (NYSE:RPAI), and Chimera Investment Corporation (NYSE:CIM). All of these stocks are in the reit – diversified industry and their market caps are closest to MFA’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Newcastle Investment Corp. (NYSE:NCT) 21 2 0
Starwood Property Trust, Inc. (NYSE:STWD) 20 1 1
Douglas Emmett, Inc. (NYSE:DEI) 8 0 1
Retail Properties of America Inc (NYSE:RPAI) 7 3 0
Chimera Investment Corporation (NYSE:CIM) 22 0 0

With the returns shown by the aforementioned studies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and MFA Financial, Inc. (NYSE:MFA) is no exception.

Click here to learn why you should track hedge funds

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