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Annaly Capital Management, Inc. (NLY) Hedge Funds Are Snapping Up

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Annaly Capital Management, Inc. (NYSE:NLY) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Annaly Capital Management, Inc. (NYSE:NLY) ready to rally soon? Prominent investors are in a bullish mood. The number of bullish hedge fund positions increased by 3 recently. Annaly Capital Management, Inc. (NYSE:NLY) was in 23 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with Annaly Capital Management, Inc. (NYSE:NLY) holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Affiliated Managers Group, Inc. (NYSE:AMG), HollyFrontier Corp (NYSE:HFC), and Pentair plc. Ordinary Share (NYSE:PNR) to gather more data points.

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In the eyes of most traders, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers look at the leaders of this club, approximately 700 funds. These money managers have their hands on the lion’s share of the smart money’s total capital, and by observing their unrivaled investments, Insider Monkey has determined a few investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to go over the recent action surrounding Annaly Capital Management, Inc. (NYSE:NLY).

How are hedge funds trading Annaly Capital Management, Inc. (NYSE:NLY)?

Heading into Q4, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 15% from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw has the biggest position in Annaly Capital Management, Inc. (NYSE:NLY), worth close to $186.5 million, corresponding to 0.3% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $48.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Soros Fund Management, and Paul J. Isaac’s Arbiter Partners Capital Management.

As aggregate interest increased, key money managers were leading the bulls’ herd. Soros Fund Management assembled the most outsized position in Annaly Capital Management, Inc. (NYSE:NLY). Soros Fund Management had $5 million invested in the company at the end of the quarter. Richard Driehaus’ Driehaus Capital also made a $2.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt..

Let’s now review hedge fund activity in other stocks similar to Annaly Capital Management, Inc. (NYSE:NLY). These stocks are Affiliated Managers Group, Inc. (NYSE:AMG), HollyFrontier Corp (NYSE:HFC), Pentair plc. Ordinary Share (NYSE:PNR), and Ultrapar Participacoes SA (ADR) (NYSE:UGP). This group of stocks’ market values is similar to Annaly Capital Management, Inc. (NYSE:NLY)’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMG 34 547877 7
HFC 40 1023227 14
PNR 23 1080944 4
UGP 6 83924 0

As you can see, these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $684 million. That figure was $267 million in Annaly Capital Management, Inc. (NYSE:NLY)’s case. HollyFrontier Corp (NYSE:HFC) is the most popular stock in this table. On the other hand, Ultrapar Participacoes SA (ADR) (NYSE:UGP) is the least popular one with only 6 bullish hedge fund positions. Annaly Capital Management, Inc. (NYSE:NLY) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, HollyFrontier Corp (NYSE:HFC) might be a better candidate to consider a long position.

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