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Hedge Funds Are In Wait and See Mode With Invesco Mortgage Capital Inc (IVR)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Invesco Mortgage Capital Inc (NYSE:IVR).

Hedge fund interest in Invesco Mortgage Capital Inc (NYSE:IVR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare IVR to other stocks including Ambac Financial Group, Inc. (NYSE:AMBC), Collegium Pharmaceutical Inc (NASDAQ:COLL), and AVROBIO, Inc. (NASDAQ:AVRO) to get a better sense of its popularity.

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

If you’d ask most shareholders, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, We choose to focus on the aristocrats of this club, about 850 funds. These investment experts oversee the majority of the smart money’s total asset base, and by tracking their first-class investments, Insider Monkey has brought to light many investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. 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. Keeping this in mind let’s go over the latest hedge fund action encompassing Invesco Mortgage Capital Inc (NYSE:IVR).

What have hedge funds been doing with Invesco Mortgage Capital Inc (NYSE:IVR)?

At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in IVR over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Invesco Mortgage Capital Inc (NYSE:IVR), which was worth $5.6 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $4.5 million worth of shares. Two Sigma Advisors, Arrowstreet Capital, and Citadel Investment Group 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 Winton Capital Management allocated the biggest weight to Invesco Mortgage Capital Inc (NYSE:IVR), around 0.12% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to IVR.

Since Invesco Mortgage Capital Inc (NYSE:IVR) has experienced a decline in interest from the smart money, logic holds that there exists a select few funds that decided to sell off their positions entirely heading into Q4. At the top of the heap, Gregg Moskowitz’s Interval Partners cut the largest stake of all the hedgies tracked by Insider Monkey, totaling close to $3.7 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $2.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Invesco Mortgage Capital Inc (NYSE:IVR) but similarly valued. We will take a look at Ambac Financial Group, Inc. (NYSE:AMBC), Collegium Pharmaceutical Inc (NASDAQ:COLL), AVROBIO, Inc. (NASDAQ:AVRO), and Big Lots, Inc. (NYSE:BIG). This group of stocks’ market valuations match IVR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMBC 15 51461 0
COLL 21 170373 2
AVRO 17 168056 3
BIG 15 75414 -9
Average 17 116326 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $19 million in IVR’s case. Collegium Pharmaceutical Inc (NASDAQ:COLL) is the most popular stock in this table. On the other hand Ambac Financial Group, Inc. (NYSE:AMBC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Invesco Mortgage Capital Inc (NYSE:IVR) is even less popular than AMBC. Hedge funds dodged a bullet by taking a bearish stance towards IVR. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 16.8 percentage points. Unfortunately IVR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); IVR investors were disappointed as the stock returned 16.5% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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