Is Newcastle Investment Corp. (NYSE:NCT) the right pick for your portfolio? Hedge funds are becoming less confident. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience
In the eyes of most investors, hedge funds are seen as worthless, old investment tools of the past. While there are greater than 8000 funds with their doors open at present, we at Insider Monkey hone in on the aristocrats of this group, close to 450 funds. Most estimates calculate that this group has its hands on most of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing picks, we have come up with a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed 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 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as integral, bullish insider trading activity is another way to break down the marketplace. Just as you’d expect, there are a number of reasons for an executive to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the valuable potential of this tactic if shareholders understand where to look (learn more here).
With all of this in mind, let’s take a peek at the recent action surrounding Newcastle Investment Corp. (NYSE:NCT).
How have hedgies been trading Newcastle Investment Corp. (NYSE:NCT)?
At the end of the fourth quarter, a total of 21 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially.
When looking at the hedgies we track, Malcolm Fairbairn’s Ascend Capital had the biggest position in Newcastle Investment Corp. (NYSE:NCT), worth close to $23 million, comprising 1% of its total 13F portfolio. The second largest stake is held by Kyle Bass of Hayman Advisors, with a $21 million position; 12% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include Ken Griffin’s Citadel Investment Group, Louis Bacon’s Moore Global Investments and Steven Cohen’s SAC Capital Advisors.
Seeing as Newcastle Investment Corp. (NYSE:NCT) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest stake of the 450+ funds we track, valued at an estimated $7 million in stock.. Neil Chriss’s fund, Hutchin Hill Capital, also said goodbye to its stock, about $2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
What do corporate executives and insiders think about Newcastle Investment Corp. (NYSE:NCT)?
Insider buying is best served when the company in question has experienced transactions within the past half-year. Over the latest 180-day time frame, Newcastle Investment Corp. (NYSE:NCT) has experienced 2 unique insiders buying, and zero insider sales (see the details of insider trades here).
With the results demonstrated by Insider Monkey’s strategies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and Newcastle Investment Corp. (NYSE:NCT) is an important part of this process.
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.