Hedge Funds Are Buying Equity Residential (EQR)

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Equity Residential (NYSE:EQR).

Is Equity Residential (NYSE:EQR) a sound investment right now? The best stock pickers were in a bullish mood. The number of long hedge fund bets improved by 8 in recent months. Equity Residential (NYSE:EQR) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistic is 33. Our calculations also showed that EQR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the new hedge fund action encompassing Equity Residential (NYSE:EQR).

Do Hedge Funds Think EQR Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in EQR over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Equity Residential (NYSE:EQR) was held by Long Pond Capital, which reported holding $158.1 million worth of stock at the end of June. It was followed by Holocene Advisors with a $113.8 million position. Other investors bullish on the company included Balyasny Asset Management, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to Equity Residential (NYSE:EQR), around 5.49% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, earmarking 0.64 percent of its 13F equity portfolio to EQR.

As aggregate interest increased, key hedge funds have jumped into Equity Residential (NYSE:EQR) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Equity Residential (NYSE:EQR). Balyasny Asset Management had $50.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $13.3 million position during the quarter. The other funds with brand new EQR positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Michael Gelband’s ExodusPoint Capital, and Noam Gottesman’s GLG Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Equity Residential (NYSE:EQR). We will take a look at CBRE Group, Inc. (NYSE:CBRE), Energy Transfer L.P. (NYSE:ET), Nucor Corporation (NYSE:NUE), Seagen Inc. (NASDAQ:SGEN), The Kroger Co. (NYSE:KR), State Street Corporation (NYSE:STT), and Keysight Technologies Inc (NYSE:KEYS). All of these stocks’ market caps resemble EQR’s market cap.

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As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $2518 million. That figure was $521 million in EQR’s case. The Kroger Co. (NYSE:KR) is the most popular stock in this table. On the other hand Energy Transfer L.P. (NYSE:ET) is the least popular one with only 29 bullish hedge fund positions. Equity Residential (NYSE:EQR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EQR is 48.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on EQR as the stock returned 10.7% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.