Is Anworth Mortgage Asset Corporation (ANH) Going To Burn These Hedge Funds?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled people. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that comes in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we know it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Anworth Mortgage Asset Corporation (NYSE:ANH), which is what we’ll do below.

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Is Anworth Mortgage Asset Corporation ready to rally soon? Hedge funds are in an optimistic mood. The number of bullish hedge fund bets rose by two recently. At the end of this article we will also compare ANH to other stocks including Nuveen Floating Rate Income Fund (NYSE:JFR), Boulder Brands Inc (NASDAQ:BDBD), and Enterprise Financial Services Corp (NASDAQ:EFSC) to get a better sense of its popularity.

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To most shareholders, hedge funds are assumed to be worthless, old investment tools of years past. While there are greater than 8,000 funds trading at present, hedge fund experts at Insider Monkey look at the moguls of this club, about 700 funds. It is estimated that this group of investors command the bulk of all hedge funds’ total capital, and by shadowing their matchless picks, Insider Monkey has spotted various investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in its backtests.

With all of this in mind, we’re going to take a look at the new action encompassing Anworth Mortgage Asset Corporation (NYSE:ANH).

How are hedge funds trading Anworth Mortgage Asset Corporation (NYSE:ANH)?

Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey were long in this stock, an upwards move of 20% from the second quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably.

According to publicly available hedge fund holdings data compiled by Insider Monkey, Nathaniel August’s Mangrove Partners has the biggest position in Anworth Mortgage Asset Corporation (NYSE:ANH), worth close to $6.5 million, accounting for 1.5% of its total 13F portfolio. Sitting in second spot is Cerberus Capital Management, led by Stephen Feinberg, holding a $6.5 million position; 0.5% of its 13F portfolio is allocated to the stock. Some other hedge funds that are bullish contain Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management, and Paul J. Isaac’s Arbiter Partners Capital Management.

Consequently, key hedge funds were breaking ground themselves. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, established the most outsized position in Anworth Mortgage Asset Corporation (NYSE:ANH). BlueCrest Capital Mgmt. had $0.4 million invested in the company at the end of the quarter. Mike Vranos’ Ellington also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Tudor Jones’ Tudor Investment Corp.

Let’s also review hedge fund activity in other stocks similar to Anworth Mortgage Asset Corporation (NYSE:ANH). We will take a look at Nuveen Floating Rate Income Fund (NYSE:JFR), Boulder Brands Inc (NASDAQ:BDBD), Enterprise Financial Services Corp (NASDAQ:EFSC), and Cowen Group, Inc. (NASDAQ:COWN). This group of stocks’ market caps resemble ANH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JFR 4 7309 0
BDBD 17 190026 0
EFSC 11 22110 3
COWN 16 106270 -4

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That eclipsed the mere $35 million in Anworth Mortgage Asset Corporation shares that were held by the investors that we track. Boulder Brands Inc (NASDAQ:BDBD) is the most popular stock in this table. On the other hand Nuveen Floating Rate Income Fund (NYSE:JFR) is the least popular one with only four bullish hedge fund positions. Anworth Mortgage Asset Corporation (NYSE:ANH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BDBD might be a better candidate to consider a long position in.