Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is First Industrial Realty Trust, Inc. (NYSE:FR) a bargain? Money managers are altogether in a bullish mood. The number of long hedge fund positions that are disclosed in regulatory 13F filings moved up by 3 lately. FR was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 8 hedge funds in our database with FR 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 Fitbit Inc (NYSE:FIT), Tenneco Inc (NYSE:TEN), and RR Donnelley & Sons Co (NASDAQ:RRD) to gather more data points.
Follow First Industrial Realty Trust Inc (NYSE:FR)
Follow First Industrial Realty Trust Inc (NYSE:FR)
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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Keeping this in mind, let’s take a look at the key action regarding First Industrial Realty Trust, Inc. (NYSE:FR).
What have hedge funds been doing with First Industrial Realty Trust, Inc. (NYSE:FR)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FR over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Martin Whitman’s Third Avenue Management has the number one position in First Industrial Realty Trust, Inc. (NYSE:FR), worth close to $63.5 million, amounting to 2.9% of its total 13F portfolio. The second largest stake is held by Millennium Management, one of the 10 largest hedge funds in the world, with a $32 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish consist of Eduardo Abush’s Waterfront Capital Partners, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. 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.
As one would reasonably expect, key money managers have been driving this bullishness. Two Sigma Advisors, led by John Overdeck and David Siegel, initiated the largest position in First Industrial Realty Trust, Inc. (NYSE:FR). Two Sigma Advisors had $5.3 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $2.1 million position during the quarter. The only other fund with a new position in the stock is Mike Vranos’s Ellington.
Let’s go over hedge fund activity in other stocks similar to First Industrial Realty Trust, Inc. (NYSE:FR). These stocks are Fitbit Inc (NYSE:FIT), Tenneco Inc (NYSE:TEN), RR Donnelley & Sons Co (NASDAQ:RRD), and Finisar Corporation (NASDAQ:FNSR). This group of stocks’ market valuations are closest to FR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIT | 35 | 442510 | 6 |
| TEN | 24 | 201461 | -3 |
| RRD | 24 | 131702 | -1 |
| FNSR | 22 | 417786 | 1 |
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $154 million in FR’s case. Fitbit Inc (NYSE:FIT) is the most popular stock in this table. On the other hand Finisar Corporation (NASDAQ:FNSR) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks First Industrial Realty Trust, Inc. (NYSE:FR) is even less popular than FNSR. 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.
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