Were Hedge Funds Right About New York Mortgage Trust, Inc. (NYMT)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of New York Mortgage Trust, Inc. (NASDAQ:NYMT).

Is New York Mortgage Trust, Inc. (NASDAQ:NYMT) a healthy stock for your portfolio? It looks like money managers are betting on the stock. The number of long hedge fund bets moved up by 4 lately. Our calculations also showed that NYMT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the latest hedge fund action regarding New York Mortgage Trust, Inc. (NASDAQ:NYMT).

What have hedge funds been doing with New York Mortgage Trust, Inc. (NASDAQ:NYMT)?

Heading into the first quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in NYMT a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

NYMT Hedge Fund Sentiment

Among these funds, Renaissance Technologies held the most valuable stake in New York Mortgage Trust, Inc. (NASDAQ:NYMT), which was worth $32.3 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $24.1 million worth of shares. Citadel Investment Group, Pinz Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pinz Capital allocated the biggest weight to New York Mortgage Trust, Inc. (NASDAQ:NYMT), around 1.16% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.34 percent of its 13F equity portfolio to NYMT.

As one would reasonably expect, key money managers have jumped into New York Mortgage Trust, Inc. (NASDAQ:NYMT) headfirst. Pinz Capital, managed by Matthew L Pinz, created the most outsized position in New York Mortgage Trust, Inc. (NASDAQ:NYMT). Pinz Capital had $3.2 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $2.2 million position during the quarter. The following funds were also among the new NYMT investors: Paul Tudor Jones’s Tudor Investment Corp, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks similar to New York Mortgage Trust, Inc. (NASDAQ:NYMT). These stocks are Dillard’s, Inc. (NYSE:DDS), Global Net Lease, Inc. (NYSE:GNL), Jagged Peak Energy Inc. (NYSE:JAG), and Harsco Corporation (NYSE:HSC). This group of stocks’ market valuations resemble NYMT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DDS 20 346150 -2
GNL 10 54469 -5
JAG 11 146367 -4
HSC 21 181577 3
Average 15.5 182141 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $72 million in NYMT’s case. Harsco Corporation (NYSE:HSC) is the most popular stock in this table. On the other hand Global Net Lease, Inc. (NYSE:GNL) is the least popular one with only 10 bullish hedge fund positions. New York Mortgage Trust, Inc. (NASDAQ:NYMT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately NYMT wasn’t nearly as popular as these 20 stocks (relative hedge fund sentiment was quite bearish); NYMT investors were disappointed as the stock returned -80.6% during the same time period 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 most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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