DCT Industrial Trust Inc. (DCT): Are Hedge Funds Right About This Stock?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

DCT Industrial Trust Inc. (NYSE:DCT) has seen a decrease in support from the world’s most elite money managers of late. 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 Ubiquiti Networks Inc (NASDAQ:UBNT), Hill-Rom Holdings, Inc. (NYSE:HRC), and Boardwalk Pipeline Partners, LP (NYSE:BWP) to gather more data points.

In the financial world, there are plenty of signals stock market investors put to use to analyze publicly traded companies. A duo of the most under-the-radar signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best money managers can beat their index-focused peers by a healthy amount (see the details here).

With all of this in mind, let’s take a glance at the recent action surrounding DCT Industrial Trust Inc. (NYSE:DCT).

How have hedgies been trading DCT Industrial Trust Inc. (NYSE:DCT)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 11% from the second quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the number one position in DCT Industrial Trust Inc. (NYSE:DCT), worth close to $104.7 million, amounting to 0.2% of its total 13F portfolio. On Millennium Management’s heels is David S. Winter and David J. Millstone of 40 North Management, with a $11.3 million position; 0.8% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions contain Greg Poole’s Echo Street Capital Management, Cliff Asness’ AQR Capital Management, and Peter Muller’s PDT Partners.

Due to the fact that DCT Industrial Trust Inc. (NYSE:DCT) has faced a declination in interest from the smart money, we can see that there lies a certain “tier” of fund managers that decided to sell off their full holdings in the third quarter. At the top of the heap, Renaissance Technologies sold off the largest investment of the 700 funds followed by Insider Monkey, valued at close to $9 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund dumped about $8.8 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest fell by 1 fund in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to DCT Industrial Trust Inc. (NYSE:DCT). These stocks are Ubiquiti Networks Inc (NASDAQ:UBNT), Hill-Rom Holdings, Inc. (NYSE:HRC), Boardwalk Pipeline Partners, LP (NYSE:BWP), and Cedar Fair, L.P. (NYSE:FUN). This group of stocks’ market caps resembles DCT Industrial Trust Inc. (NYSE:DCT)’s market cap.

As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $130 million in DCT Industrial Trust Inc. (NYSE:DCT)’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand, Ubiquiti Networks Inc (NASDAQ:UBNT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks, DCT Industrial Trust Inc. (NYSE:DCT) is even less popular than Ubiquiti Networks Inc (NASDAQ:UBNT). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.