We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether EPR Properties (NYSE:EPR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
EPR Properties (NYSE:EPR) investors should pay attention to an increase in hedge fund sentiment recently. Our calculations also showed that EPR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the key hedge fund action encompassing EPR Properties (NYSE:EPR).
How have hedgies been trading EPR Properties (NYSE:EPR)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EPR over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Weiss Asset Management was the largest shareholder of EPR Properties (NYSE:EPR), with a stake worth $36.5 million reported as of the end of September. Trailing Weiss Asset Management was Weiss Asset Management, which amassed a stake valued at $35.8 million. Two Sigma Advisors, Renaissance Technologies, and Long Pond Capital 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 LDR Capital allocated the biggest weight to EPR Properties (NYSE:EPR), around 7.74% of its 13F portfolio. LDR Capital is also relatively very bullish on the stock, designating 4.99 percent of its 13F equity portfolio to EPR.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Long Pond Capital, managed by John Khoury, established the biggest position in EPR Properties (NYSE:EPR). Long Pond Capital had $17.6 million invested in the company at the end of the quarter. Lawrence Raiman’s LDR Capital also initiated a $8.3 million position during the quarter. The following funds were also among the new EPR investors: D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks similar to EPR Properties (NYSE:EPR). We will take a look at TFS Financial Corporation (NASDAQ:TFSL), Toll Brothers Inc (NYSE:TOL), The Howard Hughes Corporation (NYSE:HHC), and Gold Fields Limited (NYSE:GFI). This group of stocks’ market values match EPR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TFSL | 11 | 173480 | 3 |
| TOL | 31 | 504909 | 7 |
| HHC | 25 | 671378 | -1 |
| GFI | 18 | 374752 | 1 |
| Average | 21.25 | 431130 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $431 million. That figure was $228 million in EPR’s case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 11 bullish hedge fund positions. EPR Properties (NYSE:EPR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately EPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EPR were disappointed as the stock returned -61.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
