Two Harbors Investment Corp (NYSE:TWO) investors should pay attention to a decrease in enthusiasm from smart money in recent months.
If you’d ask most investors, hedge funds are viewed as unimportant, old financial tools of the past. While there are more than 8000 funds in operation at present, we at Insider Monkey hone in on the upper echelon of this group, around 450 funds. It is estimated that this group oversees the majority of all hedge funds’ total asset base, and by watching their highest performing stock picks, we have determined a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as beneficial, optimistic insider trading activity is a second way to break down the stock market universe. There are a variety of motivations for a bullish insider to cut shares of his or her company, but only one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the valuable potential of this method if shareholders know what to do (learn more here).
With all of this in mind, let’s take a peek at the recent action encompassing Two Harbors Investment Corp (NYSE:TWO).
What does the smart money think about Two Harbors Investment Corp (NYSE:TWO)?
In preparation for this year, a total of 18 of the hedge funds we track were long in this stock, a change of -14% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially.
Of the funds we track, Brian Jackelow’s SAB Capital Management had the largest position in Two Harbors Investment Corp (NYSE:TWO), worth close to $90 million, accounting for 13.2% of its total 13F portfolio. Coming in second is SAC Capital Advisors, managed by Steven Cohen, which held a $45 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Andy Redleaf’s Whitebox Advisors, David Tepper’s Appaloosa Management LP and Don Morgan’s Brigade Capital.
Seeing as Two Harbors Investment Corp (NYSE:TWO) has experienced a declination in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their positions entirely at the end of the year. Interestingly, Jeffrey Bersh and Michael Wartell’s Venor Capital Management dumped the largest investment of all the hedgies we monitor, totaling about $31 million in stock.. Paul Ruddockáand Steve Heinz’s fund, Lansdowne Partners, also said goodbye to its stock, about $16 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds at the end of the year.
What do corporate executives and insiders think about Two Harbors Investment Corp (NYSE:TWO)?
Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Two Harbors Investment Corp (NYSE:TWO) has experienced 6 unique insiders buying, and zero insider sales (see the details of insider trades here).
With the returns shown by our research, everyday investors should always keep an eye on hedge fund and insider trading activity, and Two Harbors Investment Corp (NYSE:TWO) applies perfectly to this mantra.
Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.