Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Easterly Government Properties Inc (NYSE:DEA) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that DEA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a gander at the new hedge fund action surrounding Easterly Government Properties Inc (NYSE:DEA).
What does smart money think about Easterly Government Properties Inc (NYSE:DEA)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DEA over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Easterly Government Properties Inc (NYSE:DEA), worth close to $48.1 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Clint Carlson of Carlson Capital, with a $19.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions include Mark Coe’s Intrinsic Edge Capital, Ken Griffin’s Citadel Investment Group and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Easterly Government Properties Inc (NYSE:DEA), around 0.66% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, dishing out 0.35 percent of its 13F equity portfolio to DEA.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Winton Capital Management, managed by David Harding, assembled the most valuable position in Easterly Government Properties Inc (NYSE:DEA). Winton Capital Management had $1.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $1.4 million position during the quarter. The other funds with brand new DEA positions are John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Easterly Government Properties Inc (NYSE:DEA). We will take a look at Archrock, Inc. (NYSE:AROC), USANA Health Sciences, Inc. (NYSE:USNA), HNI Corp (NYSE:HNI), and Tricida, Inc. (NASDAQ:TCDA). This group of stocks’ market caps are closest to DEA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AROC | 11 | 20540 | 3 |
| USNA | 12 | 169990 | -1 |
| HNI | 16 | 79013 | 2 |
| TCDA | 17 | 702923 | 0 |
| Average | 14 | 243117 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $82 million in DEA’s case. Tricida, Inc. (NASDAQ:TCDA) is the most popular stock in this table. On the other hand Archrock, Inc. (NYSE:AROC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Easterly Government Properties Inc (NYSE:DEA) is even less popular than AROC. Hedge funds clearly dropped the ball on DEA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on DEA as the stock returned 10.5% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
