In the eyes of many of your fellow readers, hedge funds are seen as overrated, outdated investment vehicles of an era lost to time. Although there are In excess of 8,000 hedge funds with their doors open today, Insider Monkey looks at the elite of this group, close to 525 funds. Analysts calculate that this group oversees most of all hedge funds’ total capital, and by monitoring their highest quality equity investments, we’ve deciphered a number of investment strategies that have historically outstripped the S&P 500. 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 topped the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).
Just as necessary, bullish insider trading activity is another way to look at the world of equities. As the old adage goes: there are a variety of motivations for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would buy. Several empirical studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).
Thus, we’re going to examine the newest info for KKR Financial Holdings LLC (NYSE:KFN).
What does the smart money think about KKR Financial Holdings LLC (NYSE:KFN)?
In preparation for the third quarter, a total of 18 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly.
Out of the hedge funds we follow, Leon Cooperman’s Omega Advisors had the largest position in KKR Financial Holdings LLC (NYSE:KFN), worth close to $155.7 million, comprising 2.4% of its total 13F portfolio. Sitting at the No. 2 spot is Wayne Cooperman of Cobalt Capital Management, with a $32.3 million position; 3.1% of its 13F portfolio is allocated to the stock. Other hedge funds that hold long positions include Anthony Bozza’s Lakewood Capital Management, Bill Miller’s Legg Mason Capital Management and Chuck Royce’s Royce & Associates.
Due to the fact KKR Financial Holdings LLC (NYSE:KFN) has experienced declining interest from upper-tier hedge fund managers, we can see that there is a sect of hedgies that elected to cut their full holdings at the end of the second quarter. Intriguingly, Carl Tiedemann and Michael Tiedemann’s TIG Advisors sold off the largest stake of all the hedgies we watch, comprising an estimated $1.1 million in call options., and Brian Taylor of Pine River Capital Management was right behind this move, as the fund cut about $1.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How have insiders been trading KKR Financial Holdings LLC (NYSE:KFN)?
Legal insider trading, particularly when it’s bullish, is particularly usable when the company in question has experienced transactions within the past half-year. Over the latest half-year time period, KKR Financial Holdings LLC (NYSE:KFN) has seen 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 KKR Financial Holdings LLC (NYSE:KFN). These stocks are Home Loan Servicing Solutions Ltd (NASDAQ:HLSS), Walter Investment Management Corp (NYSE:WAC), Nationstar Mortgage Holdings Inc (NYSE:NSM), Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), and Invesco Mortgage Capital Inc (NYSE:IVR). This group of stocks belong to the mortgage investment industry and their market caps are closest to KFN’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Home Loan Servicing Solutions Ltd (NASDAQ:HLSS) | 17 | 0 | 0 |
| Walter Investment Management Corp (NYSE:WAC) | 17 | 0 | 0 |
| Nationstar Mortgage Holdings Inc (NYSE:NSM) | 23 | 0 | 0 |
| Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) | 13 | 0 | 0 |
| Invesco Mortgage Capital Inc (NYSE:IVR) | 13 | 0 | 0 |
Using the returns demonstrated by our analyses, average investors must always pay attention to hedge fund and insider trading sentiment, and KKR Financial Holdings LLC (NYSE:KFN) is an important part of this process.
