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Is Annaly Capital Management, Inc. (NLY) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Annaly Capital Management, Inc. (NYSE:NLY) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Annaly Capital Management, Inc. (NYSE:NLY) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. Annaly Capital Management, Inc. (NYSE:NLY) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. Our calculations also showed that NLY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

If you’d ask most stock holders, hedge funds are assumed to be unimportant, old financial vehicles of years past. While there are more than 8000 funds with their doors open at present, Our experts choose to focus on the masters of this club, around 850 funds. Most estimates calculate that this group of people handle most of the hedge fund industry’s total asset base, and by tailing their finest investments, Insider Monkey has revealed a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a gander at the recent hedge fund action regarding Annaly Capital Management, Inc. (NYSE:NLY).

Hedge fund activity in Annaly Capital Management, Inc. (NYSE:NLY)

At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NLY over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, D E Shaw held the most valuable stake in Annaly Capital Management, Inc. (NYSE:NLY), which was worth $139 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $48.8 million worth of shares. Millennium Management, Clough Capital Partners, and Arrowstreet Capital 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 Clough Capital Partners allocated the biggest weight to Annaly Capital Management, Inc. (NYSE:NLY), around 2.69% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.89 percent of its 13F equity portfolio to NLY.

Since Annaly Capital Management, Inc. (NYSE:NLY) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Brian J. Higgins’s King Street Capital dumped the biggest stake of the 750 funds followed by Insider Monkey, worth about $25.4 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $18.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Annaly Capital Management, Inc. (NYSE:NLY) but similarly valued. These stocks are PPD, Inc. (NASDAQ:PPD), Lamb Weston Holdings, Inc. (NYSE:LW), Guidewire Software Inc (NYSE:GWRE), Brookfield Property Partners LP (NASDAQ:BPY), Fidelity National Financial Inc (NYSE:FNF), Huntington Bancshares Incorporated (NASDAQ:HBAN), and Zynga Inc (NASDAQ:ZNGA). This group of stocks’ market caps match NLY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPD 27 620340 0
LW 25 189982 -4
GWRE 29 1008560 -5
BPY 6 43730 -1
FNF 47 1052423 4
HBAN 30 90448 1
ZNGA 52 1094586 -7
Average 30.9 585724 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $586 million. That figure was $289 million in NLY’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NASDAQ:BPY) 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. Our overall hedge fund sentiment score for NLY is 38.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on NLY as the stock returned 11.8% in the third quarter and outperformed the market by an even larger margin.

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