New Mountain Finance Corp. (NYSE:NMFC) investors should pay attention to an increase in support from the world’s most elite money managers lately.
According to most stock holders, hedge funds are viewed as worthless, outdated investment tools of years past. While there are more than 8000 funds in operation at the moment, we hone in on the leaders of this group, about 450 funds. It is estimated that this group controls the majority of the smart money’s total capital, and by keeping an eye on their best investments, we have spotted a few investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy beat 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Just as important, bullish insider trading sentiment is another way to parse down the marketplace. Just as you’d expect, there are plenty of incentives for a corporate insider to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this method if investors understand where to look (learn more here).
Keeping this in mind, we’re going to take a gander at the recent action surrounding New Mountain Finance Corp. (NYSE:NMFC).
How are hedge funds trading New Mountain Finance Corp. (NYSE:NMFC)?
At Q1’s end, a total of 10 of the hedge funds we track held long positions in this stock, a change of 43% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially.
Of the funds we track, New Mountain Capital, managed by Steven B. Klinsky, holds the biggest position in New Mountain Finance Corp. (NYSE:NMFC). New Mountain Capital has a $35 million position in the stock, comprising 20.6% of its 13F portfolio. On New Mountain Capital’s heels is Robert B. Gillam of McKinley Capital Management, with a $3.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include John Fichthorn’s Dialectic Capital Management, Scott Scher & Michael Prober’s Clovis Capital Management and Bruce Silver’s Silver Capital Management LLC.
As one would reasonably expect, key money managers were leading the bulls’ herd. Dialectic Capital Management, managed by John Fichthorn, created the most valuable position in New Mountain Finance Corp. (NYSE:NMFC). Dialectic Capital Management had 1.8 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new NMFC investors: D. E. Shaw’s D E Shaw and Matthew Tewksbury’s Stevens Capital Management.
How have insiders been trading New Mountain Finance Corp. (NYSE:NMFC)?
Insider purchases made by high-level executives is at its handiest when the company we’re looking at has experienced transactions within the past 180 days. Over the last 180-day time frame, New Mountain Finance Corp. (NYSE:NMFC) has experienced 3 unique insiders buying, 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 New Mountain Finance Corp. (NYSE:NMFC). These stocks are ROI Acquisition Corp (NASDAQ:ROIQ), Lydall, Inc. (NYSE:LDL), SCG Financial Acquisition Corp (NASDAQ:SCGQ), Blue Wolf Mongolia Holdings Corp. (NASDAQ:MNGL), and Hyde Park Acquisition Corp II (NASDAQ:HPAC). This group of stocks are in the conglomerates industry and their market caps are closest to NMFC’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|ROI Acquisition Corp (NASDAQ:ROIQ)||0||3||3|
|Lydall, Inc. (NYSE:LDL)||13||0||5|
|SCG Financial Acquisition Corp (NASDAQ:SCGQ)||5||2||0|
|Blue Wolf Mongolia Holdings Corp. (NASDAQ:MNGL)||6||0||0|
|Hyde Park Acquisition Corp II (NASDAQ:HPAC)||6||0||0|
With the results shown by our studies, retail investors must always watch hedge fund and insider trading activity, and New Mountain Finance Corp. (NYSE:NMFC) is no exception.