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Is Newcastle Investment Corp. (NCT) Going to Burn These Hedge Funds?

To many of your fellow readers, hedge funds are seen as overrated, outdated investment tools of an era lost to time. Although there are over 8,000 hedge funds in operation today, this site focuses on the bigwigs of this club, close to 525 funds. Analysts calculate that this group has its hands on the majority of all hedge funds’ total assets, and by paying attention to their highest quality equity investments, we’ve brought to light a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as crucial, positive insider trading sentiment is another way to look at the investments you’re interested in. Just as you’d expect, there are a number of reasons for an insider to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this strategy if investors know what to do (learn more here).

Newcastle Investment Corp. (NYSE:NCT)

Furthermore, let’s examine the recent info about Newcastle Investment Corp. (NYSE:NCT).

How are hedge funds trading Newcastle Investment Corp. (NYSE:NCT)?

Heading into Q3, a total of 33 of the hedge funds we track were bullish in this stock, a change of -15% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably.

When using filings from the hedgies we track, Osterweis Capital Management, managed by John Osterweis, holds the biggest position in Newcastle Investment Corp. (NYSE:NCT). Osterweis Capital Management has a $65.4 million position in the stock, comprising 2.4% of its 13F portfolio. Sitting at the No. 2 spot is James Dondero of Highland Capital Management, with a $37.6 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Other peers that are bullish include Leon Cooperman’s Omega Advisors, Neil Chriss’s Hutchin Hill Capital and Julian Robertson’s Tiger Management.

Because Newcastle Investment Corp. (NYSE:NCT) has experienced bearish sentiment from the top-tier hedge fund industry, logic holds that there were a few funds that slashed their positions entirely at the end of the second quarter. At the top of the heap, James Dinan’s York Capital Management dropped the largest investment of the 450+ funds we key on, valued at about $66.7 million in stock, and Jim Simons of Renaissance Technologies was right behind this move, as the fund sold off about $34.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 6 funds at the end of the second quarter.

Insider trading activity in Newcastle Investment Corp. (NYSE:NCT)

Legal insider trading, particularly when it’s bullish, is particularly usable when the company in focus has seen transactions within the past six months. Over the latest half-year time frame, Newcastle Investment Corp. (NYSE:NCT) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Newcastle Investment Corp. (NYSE:NCT). These stocks are Douglas Emmett, Inc. (NYSE:DEI), Retail Properties of America Inc (NYSE:RPAI), MFA Financial, Inc. (NYSE:MFA), Chimera Investment Corporation (NYSE:CIM), and Lexington Realty Trust (NYSE:LXP). This group of stocks are in the reit – diversified industry and their market caps are similar to NCT’s market cap.

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