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Is Colony Financial Inc (CLNY) Going to Burn These Hedge Funds?

Colony Financial Inc (NYSE:CLNY) was in 17 hedge funds’ portfolio at the end of the first quarter of 2013. CLNY investors should pay attention to an increase in hedge fund sentiment recently. There were 16 hedge funds in our database with CLNY holdings at the end of the previous quarter.

Colony Financial Inc (NYSE:CLNY)

At the moment, there are many metrics market participants can use to track their holdings. Two of the best are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the broader indices by a solid amount (see just how much).

Equally as integral, bullish insider trading activity is a second way to parse down the world of equities. There are plenty of stimuli for a corporate insider to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the impressive potential of this strategy if you understand where to look (learn more here).

Now, we’re going to take a gander at the key action encompassing Colony Financial Inc (NYSE:CLNY).

What have hedge funds been doing with Colony Financial Inc (NYSE:CLNY)?

In preparation for this quarter, a total of 17 of the hedge funds we track held long positions in this stock, a change of 6% from the first quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully.

According to our comprehensive database, Brian Jackelow’s SAB Capital Management had the most valuable position in Colony Financial Inc (NYSE:CLNY), worth close to $117.9 million, accounting for 9.3% of its total 13F portfolio. The second largest stake is held by SAC Capital Advisors, managed by Steven Cohen, which held a $75 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include Ken Griffin’s Citadel Investment Group, Chuck Royce’s Royce & Associates and Scott Scher & Michael Prober’s Clovis Capital Management.

As aggregate interest increased, specific money managers have been driving this bullishness. Ascend Capital, managed by Malcolm Fairbairn, established the most outsized position in Colony Financial Inc (NYSE:CLNY). Ascend Capital had 11.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $9.6 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Matthew Hulsizer’s PEAK6 Capital Management, and D. E. Shaw’s D E Shaw.

What have insiders been doing with Colony Financial Inc (NYSE:CLNY)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has seen transactions within the past 180 days. Over the last 180-day time frame, Colony Financial Inc (NYSE:CLNY) has seen zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Colony Financial Inc (NYSE:CLNY). These stocks are Cousins Properties Inc (NYSE:CUZ), Investors Real Estate Trust (NYSE:IRET), Capstead Mortgage Corporation (NYSE:CMO), Spirit Realty Capital Inc (NYSE:SRC), and American Capital Mortgage Investment Crp (NASDAQ:MTGE). This group of stocks are the members of the reit – diversified industry and their market caps are similar to CLNY’s market cap.