Is MFA Financial, Inc. (NYSE:MFA) a good investment?
If you were to ask many investors, hedge funds are seen as delayed, outdated financial vehicles of a period lost to current times. Although there are more than 8,000 hedge funds trading currently, this site focuses on the bigwigs of this group, around 525 funds. It is widely held that this group has its hands on the majority of the hedge fund industry's total capital, and by watching their best investments, we've revealed a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 trumped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Just as key, optimistic insider trading activity is a second way to look at the world of equities. Just as you'd expect, there are a number of incentives for a corporate insider to drop shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this strategy if piggybackers understand what to do (learn more here).
Furthermore, let's examine the latest info for MFA Financial, Inc. (NYSE:MFA).
At Q2's end, a total of 18 of the hedge funds we track were long in this stock, a change of -14% from one quarter earlier. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings meaningfully.
According to our 13F database, Beach Point Capital Management, managed by Carl Goldsmith and Scott Klein, holds the biggest position in MFA Financial, Inc. (NYSE:MFA). Beach Point Capital Management has a $19.2 million position in the stock, comprising 7.2% of its 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which held a $16.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions include Frank Brosens's Taconic Capital, Jim Simons's Renaissance Technologies and Chuck Royce's Royce & Associates.
Since MFA Financial, Inc. (NYSE:MFA) has witnessed bearish sentiment from upper-tier hedge fund managers, logic holds that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. At the top of the heap, James Melcher's Balestra said goodbye to the biggest position of the "upper crust" of funds we monitor, comprising about $16.8 million in stock. David Tepper's fund, Appaloosa Management LP, also dropped its stock, about $8.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.
Insider buying made by high-level executives is particularly usable when the company we're looking at has experienced transactions within the past half-year. Over the last 180-day time frame, MFA Financial, Inc. (NYSE:MFA) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll go over the relationship between both of these indicators 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). This group of stocks belong to the reit - diversified industry and their market caps are closest to MFA's market cap.