Did Hedge Funds Make The Right Call On W.P. Carey Inc. (WPC) ?

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 W.P. Carey Inc. (NYSE:WPC) and determine whether the smart money was really smart about this stock.

W.P. Carey Inc. (NYSE:WPC) investors should be aware of an increase in hedge fund sentiment lately. WPC was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with WPC holdings at the end of the previous quarter. Our calculations also showed that WPC 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 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.

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. With all of this in mind let’s take a look at the new hedge fund action regarding W.P. Carey Inc. (NYSE:WPC).

How have hedgies been trading W.P. Carey Inc. (NYSE:WPC)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the fourth quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in WPC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the biggest position in W.P. Carey Inc. (NYSE:WPC), worth close to $7.6 million, amounting to less than 0.1%% of its total 13F portfolio. On Two Sigma Advisors’s heels is Citadel Investment Group, led by Ken Griffin, holding a $6.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Ayrshire Capital Management allocated the biggest weight to W.P. Carey Inc. (NYSE:WPC), around 0.44% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to WPC.

As industrywide interest jumped, some big names have jumped into W.P. Carey Inc. (NYSE:WPC) headfirst. ExodusPoint Capital, managed by Michael Gelband, created the largest position in W.P. Carey Inc. (NYSE:WPC). ExodusPoint Capital had $1.1 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $1.1 million investment in the stock during the quarter. The other funds with brand new WPC positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Renee Yao’s Neo Ivy Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as W.P. Carey Inc. (NYSE:WPC) but similarly valued. We will take a look at Ventas, Inc. (NYSE:VTR), Godaddy Inc (NYSE:GDDY), CBOE Global Markets Inc (NASDAQ:CBOE), and Essential Utilities Inc (NYSE:WTRG). All of these stocks’ market caps resemble WPC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $971 million. That figure was $34 million in WPC’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks W.P. Carey Inc. (NYSE:WPC) is even less popular than WTRG. Hedge funds dodged a bullet by taking a bearish stance towards WPC. 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 WPC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WPC investors were disappointed as the stock returned 18.3% 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.

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