Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty-three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about City Office REIT Inc (NYSE:CIO).
City Office REIT Inc (NYSE:CIO) was in 5 hedge funds’ portfolios at the end of September. CIO shareholders have witnessed an increase in enthusiasm from smart money recently. There were 4 hedge funds in our database with CIO holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Basic Energy Services, Inc (NYSE:BAS), Republic First Bancorp, Inc. (NASDAQ:FRBK), and Nordic American Offshore Ltd (NYSE:NAO) to gather more data points.
Follow City Office Reit Inc. (CVE:CIO)
Follow City Office Reit Inc. (CVE:CIO)
In the eyes of most traders, hedge funds are viewed as worthless, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our researchers choose to focus on the bigwigs of this club, around 700 funds. Most estimates calculate that this group of people command the lion’s share of the smart money’s total capital, and by watching their best investments, Insider Monkey has come up with various investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s review the key action encompassing City Office REIT Inc (NYSE:CIO).
Hedge fund activity in City Office REIT Inc (NYSE:CIO)
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter. With hedgies’ capital changing hands, there exist a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Philip Hempleman’s Ardsley Partners has the biggest position in City Office REIT Inc (NYSE:CIO), worth close to $3.5 million, accounting for 0.9% of its total 13F portfolio. The second most bullish fund manager is Amy Minella of Cardinal Capital, with a $1.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish encompass Jim Simons’s Renaissance Technologies, Anand Parekh’s Alyeska Investment Group.
Consequently, some big names were leading the bulls’ herd. Nine Chapters Capital Management, managed by Chao Ku, established a position in City Office REIT Inc (NYSE:CIO). Nine Chapters Capital Management had $0.2 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks similar to City Office REIT Inc (NYSE:CIO). These stocks are Basic Energy Services, Inc (NYSE:BAS), Republic First Bancorp, Inc. (NASDAQ:FRBK), Nordic American Offshore Ltd (NYSE:NAO), and QLT Inc. (USA) (NASDAQ:QLTI). This group of stocks’ market values match CIO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BAS | 10 | 32726 | -5 |
| FRBK | 5 | 17072 | -1 |
| NAO | 5 | 35678 | 0 |
| QLTI | 19 | 59657 | -2 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $7 million in CIO’s case. The least popular stocks in this table are Republic First Bancorp, Inc. (NASDAQ:FRBK), and Nordic American Offshore Ltd (NYSE:NAO), while the most popular one is QLT Inc. (USA) (NASDAQ:QLTI). Compared to these stocks City Office REIT Inc (NYSE:CIO) has the same number of bullish hedge fund positions as the least popular stocks in this group. This may indicate that smart money isn’t behind this stock, and to understand why is that, further research is necessary. It is possible that investors thought that the stock is overvalued because they weren’t considering the bullish thesis. In either case, more detailed analyzes are advisable.
