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Hedge Funds Are Done Buying New York Mortgage Trust, Inc. (NYMT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of New York Mortgage Trust, Inc. (NASDAQ:NYMT) based on that data and determine whether they were really smart about the stock.

New York Mortgage Trust, Inc. (NASDAQ:NYMT) was in 13 hedge funds’ portfolios at the end of March. NYMT investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. There were 15 hedge funds in our database with NYMT holdings at the end of the previous quarter. Our calculations also showed that NYMT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Anna Nikolayevsky Axel Capital

Anna Nikolayevsky of Axel Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 9 states that banned plastic bags to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the recent hedge fund action surrounding New York Mortgage Trust, Inc. (NASDAQ:NYMT).

How have hedgies been trading New York Mortgage Trust, Inc. (NASDAQ:NYMT)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NYMT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Winton Capital Management held the most valuable stake in New York Mortgage Trust, Inc. (NASDAQ:NYMT), which was worth $6.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $3.2 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to New York Mortgage Trust, Inc. (NASDAQ:NYMT), around 0.4% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.17 percent of its 13F equity portfolio to NYMT.

Because New York Mortgage Trust, Inc. (NASDAQ:NYMT) has witnessed a decline in interest from hedge fund managers, logic holds that there were a few fund managers that elected to cut their full holdings heading into Q4. Interestingly, Renaissance Technologies said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, worth about $32.3 million in stock. Matthew L Pinz’s fund, Pinz Capital, also said goodbye to its stock, about $3.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to New York Mortgage Trust, Inc. (NASDAQ:NYMT). These stocks are Hanger, Inc. (NYSE:HNGR), Cerence Inc. (NASDAQ:CRNC), Quotient Technology Inc (NYSE:QUOT), and SMART Global Holdings, Inc. (NASDAQ:SGH). This group of stocks’ market valuations are closest to NYMT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HNGR 15 50523 0
CRNC 11 66375 -11
QUOT 18 242478 3
SGH 17 264406 -1
Average 15.25 155946 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $15 million in NYMT’s case. Quotient Technology Inc (NYSE:QUOT) is the most popular stock in this table. On the other hand Cerence Inc. (NASDAQ:CRNC) is the least popular one with only 11 bullish hedge fund positions. New York Mortgage Trust, Inc. (NASDAQ:NYMT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on NYMT as the stock returned 77.4% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.