Hedge Funds Are Betting On Lexington Realty Trust (LXP)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Lexington Realty Trust (NYSE:LXP) .

Lexington Realty Trust (NYSE:LXP) was in 16 hedge funds’ portfolios at the end of September. LXP has seen an increase in hedge fund sentiment of late. There were 13 hedge funds in our database with LXP positions 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 Lexmark International Inc (NYSE:LXK), United Natural Foods, Inc. (NASDAQ:UNFI), and The Medicines Company (NASDAQ:MDCO) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Lexington Realty Trust (NYSE:LXP)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 23% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in LXP heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Forward Management, led by J. Alan Reid, Jr., holds the number one position in Lexington Realty Trust (NYSE:LXP). Forward Management has a $16.7 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Israel Englander’s Millennium Management holding a $9.7 million position. Remaining hedge funds and institutional investors with similar optimism contain John Overdeck and David Siegel’s Two Sigma Advisors, Cliff Asness’ AQR Capital Management and Chuck Royce’s Royce & Associates. We should note that Forward Management is 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.

Now, key hedge funds were breaking ground themselves. Echo Street Capital Management, led by Greg Poole, established the most outsized position in Lexington Realty Trust (NYSE:LXP). Echo Street Capital Management had $1.7 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management and Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Lexington Realty Trust (NYSE:LXP) but similarly valued. We will take a look at Lexmark International Inc (NYSE:LXK), United Natural Foods, Inc. (NASDAQ:UNFI), The Medicines Company (NASDAQ:MDCO), and SolarCity Corp (NASDAQ:SCTY). All of these stocks’ market caps match LXP’s market cap.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $283 million. That figure was $54 million in LXP’s case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand SolarCity Corp (NASDAQ:SCTY) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Lexington Realty Trust (NYSE:LXP) is even less popular than SCTY. 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.

Disclosure: None