Do Hedge Funds Love Federal Realty Investment Trust (FRT)?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Federal Realty Investment Trust (NYSE:FRT).

Is Federal Realty Investment Trust a healthy stock for your portfolio? Prominent investors are in an optimistic mood. The number of bullish hedge fund bets improved by 8 recently. FRT was in 13 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with FRT 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 BorgWarner Inc. (NYSE:BWA), The Western Union Company (NYSE:WU), and Annaly Capital Management, Inc. (NYSE:NLY) to gather more data points.

With all of this in mind, we’re going to analyze the fresh action encompassing Federal Realty Investment Trust (NYSE:FRT).

Hedge fund activity in Federal Realty Investment Trust (NYSE:FRT)

Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 160% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jeffrey Furber’s AEW Capital Management has the number one position in Federal Realty Investment Trust (NYSE:FRT), worth close to $164.8 million, corresponding to 3.9% of its total 13F portfolio. Sitting at the No. 2 spot is Soros Fund Management, led by George Soros, holding a $16.6 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass David S. Winter and David J. Millstone’s 40 North Management, David Harding’s Winton Capital Management and D. E. Shaw’s D E Shaw.

As industrywide interest jumped, specific money managers have jumped into Federal Realty Investment Trust (NYSE:FRT) headfirst. Soros Fund Management, managed by George Soros, created the most outsized position in Federal Realty Investment Trust (NYSE:FRT). Soros Fund Management had $16.6 million invested in the company at the end of the quarter. David S. Winter and David J. Millstone’s 40 North Management also made a $11.4 million investment in the stock during the quarter. The following funds were also among the new FRT investors: David Harding’s Winton Capital Management, D. E. Shaw’s D E Shaw, and Thomas Bailard’s Bailard Inc.

Let’s go over hedge fund activity in other stocks similar to Federal Realty Investment Trust (NYSE:FRT). These stocks are BorgWarner Inc. (NYSE:BWA), The Western Union Company (NYSE:WU), Annaly Capital Management, Inc. (NYSE:NLY), and Affiliated Managers Group, Inc. (NYSE:AMG). All of these stocks’ market caps match FRT’s market cap.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $546 million. That figure was $222 million in FRT’s case. Affiliated Managers Group, Inc. (NYSE:AMG) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Federal Realty Investment Trust (NYSE:FRT) is even less popular than NLY. 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.