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Is Invesco Mortgage Capital Inc (IVR) A Good Stock To Buy?

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds.

Invesco Mortgage Capital Inc (NYSE:IVR) shareholders have witnessed a decrease in enthusiasm from smart money of late. IVR was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with IVR positions at the end of the previous quarter. Our calculations also showed that IVR isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are greater than 8000 funds in operation today, We hone in on the upper echelon of this club, about 750 funds. These money managers direct the majority of all hedge funds’ total capital, and by observing their best investments, Insider Monkey has discovered several investment strategies that have historically exceeded the market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

John Overdeck of Two Sigma

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the recent hedge fund action regarding Invesco Mortgage Capital Inc (NYSE:IVR).

How are hedge funds trading Invesco Mortgage Capital Inc (NYSE:IVR)?

At Q2’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in IVR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

No of Hedge Funds with IVR Positions

The largest stake in Invesco Mortgage Capital Inc (NYSE:IVR) was held by Renaissance Technologies, which reported holding $30 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $27.2 million position. Other investors bullish on the company included Millennium Management, AQR Capital Management, and Two Sigma Advisors.

Seeing as Invesco Mortgage Capital Inc (NYSE:IVR) has faced a decline in interest from the smart money, logic holds that there exists a select few funds who were dropping their full holdings by the end of the second quarter. Intriguingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. sold off the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $0.3 million in stock, and Roger Ibbotson’s Zebra Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 4 funds by the end of the second quarter.

Let’s now take a look at 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 Cal-Maine Foods Inc (NASDAQ:CALM), Euronav NV (NYSE:EURN), Myriad Genetics, Inc. (NASDAQ:MYGN), and M.D.C. Holdings, Inc. (NYSE:MDC). 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
CALM 16 182069 0
EURN 16 153669 5
MYGN 15 214253 -2
MDC 17 81899 0
Average 16 157973 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $69 million in IVR’s case. M.D.C. Holdings, Inc. (NYSE:MDC) is the most popular stock in this table. On the other hand Myriad Genetics, Inc. (NASDAQ:MYGN) 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 MYGN. Hedge funds dodged a bullet by taking a bearish stance towards IVR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IVR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IVR investors were disappointed as the stock returned -2.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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