The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Equity Residential (NYSE:EQR) and determine whether the smart money was really smart about this stock.
Is Equity Residential (NYSE:EQR) the right investment to pursue these days? The best stock pickers were turning less bullish. The number of bullish hedge fund positions went down by 6 recently. Our calculations also showed that EQR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). EQR was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with EQR positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Daniel Och, Founder of OZ Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to take a gander at the key hedge fund action regarding Equity Residential (NYSE:EQR).
What have hedge funds been doing with Equity Residential (NYSE:EQR)?
At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in EQR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Equity Residential (NYSE:EQR), which was worth $43.5 million at the end of the third quarter. On the second spot was D E Shaw which amassed $27.2 million worth of shares. Citadel Investment Group, Renaissance Technologies, and Adage Capital Management 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 Hill Winds Capital allocated the biggest weight to Equity Residential (NYSE:EQR), around 10.11% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, designating 4.33 percent of its 13F equity portfolio to EQR.
Seeing as Equity Residential (NYSE:EQR) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few funds that decided to sell off their entire stakes in the first quarter. Interestingly, Greg Poole’s Echo Street Capital Management dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $18.9 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also sold off its stock, about $6.9 million worth. These moves are important to note, as total hedge fund interest was cut by 6 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks similar to Equity Residential (NYSE:EQR). These stocks are Square, Inc. (NYSE:SQ), T. Rowe Price Group, Inc. (NASDAQ:TROW), Verisk Analytics, Inc. (NASDAQ:VRSK), and Public Service Enterprise Group Incorporated (NYSE:PEG). All of these stocks’ market caps are closest to EQR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQ | 56 | 1609151 | 0 |
| TROW | 24 | 191083 | -3 |
| VRSK | 31 | 924894 | -2 |
| PEG | 34 | 901655 | 3 |
| Average | 36.25 | 906696 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $907 million. That figure was $175 million in EQR’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand T. Rowe Price Group, Inc. (NASDAQ:TROW) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Equity Residential (NYSE:EQR) is even less popular than TROW. Hedge funds dodged a bullet by taking a bearish stance towards EQR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately EQR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); EQR investors were disappointed as the stock returned -3.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
