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. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Piedmont Office Realty Trust, Inc. (NYSE:PDM).
Is Piedmont Office Realty Trust, Inc. (NYSE:PDM) a healthy stock for your portfolio? The smart money is taking an optimistic view. The number of long hedge fund bets went up by 2 in recent months. Our calculations also showed that PDM 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).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we’re going to take a gander at the new hedge fund action surrounding Piedmont Office Realty Trust, Inc. (NYSE:PDM).
What have hedge funds been doing with Piedmont Office Realty Trust, Inc. (NYSE:PDM)?
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in PDM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Piedmont Office Realty Trust, Inc. (NYSE:PDM), which was worth $61.6 million at the end of the third quarter. On the second spot was GLG Partners which amassed $16.4 million worth of shares. Millennium Management, Winton Capital Management, and AQR Capital Management 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 Caxton Associates LP allocated the biggest weight to Piedmont Office Realty Trust, Inc. (NYSE:PDM), around 0.09% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to PDM.
Consequently, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the largest position in Piedmont Office Realty Trust, Inc. (NYSE:PDM). Millennium Management had $9.8 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also made a $0.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Piedmont Office Realty Trust, Inc. (NYSE:PDM) but similarly valued. We will take a look at EQT Corporation (NYSE:EQT), Emergent Biosolutions Inc (NYSE:EBS), Brandywine Realty Trust (NYSE:BDN), and SINA Corp (NASDAQ:SINA). This group of stocks’ market values are similar to PDM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQT | 29 | 368457 | -7 |
| EBS | 12 | 122641 | -7 |
| BDN | 18 | 99587 | -1 |
| SINA | 18 | 168492 | -2 |
| Average | 19.25 | 189794 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $190 million. That figure was $97 million in PDM’s case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Emergent Biosolutions Inc (NYSE:EBS) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Piedmont Office Realty Trust, Inc. (NYSE:PDM) is even less popular than EBS. Hedge funds dodged a bullet by taking a bearish stance towards PDM. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately PDM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PDM investors were disappointed as the stock returned -22.1% 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 most of these stocks already outperformed the market so far in 2020.
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.
