Do Hedge Funds Love Senior Housing Properties Trust (SNH)?

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 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that 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 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. 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 Senior Housing Properties Trust (NYSE:SNH) .

Senior Housing Properties Trust (NYSE:SNH) has seen a decrease in support from the world’s most successful money managers in recent months. There were 16 hedge funds in our database with SNH positions at the end of June. 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 Sun Communities Inc (NYSE:SUI), Keysight Technologies Inc (NYSE:KEYS), and Pilgrim’s Pride Corporation (NASDAQ:PPC) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, we’re going to take a gander at the new action regarding Senior Housing Properties Trust (NYSE:SNH).

How are hedge funds trading Senior Housing Properties Trust (NYSE:SNH)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in SNH heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Vertex One Asset Management, led by John Thiessen, holds the most valuable position in Senior Housing Properties Trust (NYSE:SNH). Vertex One Asset Management has a $21.9 million position in the stock, comprising 3.5% of its 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $20.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish consist of Anand Parekh’s Alyeska Investment Group, Jim Simons’s Renaissance Technologies and Cliff Asness’s AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. It’s worth mentioning that Michael Platt and William Reeves’s BlueCrest Capital Mgmt. got rid of the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $0.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dropped about $0.4 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Senior Housing Properties Trust (NYSE:SNH) but similarly valued. We will take a look at Sun Communities Inc (NYSE:SUI), Keysight Technologies Inc (NYSE:KEYS), Pilgrim’s Pride Corporation (NASDAQ:PPC), and Starwood Property Trust, Inc. (NYSE:STWD). This group of stocks’ market values match SNH’s market value.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $83 million in SNH’s case. Pilgrim’s Pride Corporation (NASDAQ:PPC) is the most popular stock in this table. On the other hand Keysight Technologies Inc (NYSE:KEYS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Senior Housing Properties Trust (NYSE:SNH) is even less popular than KEYS. 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.