In this article you are going to find out whether hedge funds think Washington Real Estate Investment Trust (NYSE:WRE) 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.
Is Washington Real Estate Investment Trust (NYSE:WRE) the right investment to pursue these days? Hedge funds are getting less optimistic. The number of long hedge fund positions shrunk by 4 in recent months. Our calculations also showed that WRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). WRE was in 5 hedge funds’ portfolios at the end of March. There were 9 hedge funds in our database with WRE holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the recent hedge fund action surrounding Washington Real Estate Investment Trust (NYSE:WRE).
Hedge fund activity in Washington Real Estate Investment Trust (NYSE:WRE)
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -44% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in WRE a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Washington Real Estate Investment Trust (NYSE:WRE), which was worth $81.9 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $6.5 million worth of shares. Point72 Asset Management, Citadel Investment Group, and PEAK6 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 Winton Capital Management allocated the biggest weight to Washington Real Estate Investment Trust (NYSE:WRE), around 0.17% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to WRE.
Judging by the fact that Washington Real Estate Investment Trust (NYSE:WRE) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that elected to cut their positions entirely in the first quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital dumped the largest stake of all the hedgies followed by Insider Monkey, valued at close to $0.7 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $0.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 4 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks similar to Washington Real Estate Investment Trust (NYSE:WRE). These stocks are Synaptics Incorporated (NASDAQ:SYNA), Coca-Cola Consolidated Inc. (NASDAQ:COKE), Principia Biopharma Inc. (NASDAQ:PRNB), and Steven Madden, Ltd. (NASDAQ:SHOO). All of these stocks’ market caps are similar to WRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYNA | 26 | 345715 | 0 |
| COKE | 9 | 14446 | -2 |
| PRNB | 21 | 734674 | 1 |
| SHOO | 18 | 58658 | -4 |
| Average | 18.5 | 288373 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $90 million in WRE’s case. Synaptics Incorporated (NASDAQ:SYNA) is the most popular stock in this table. On the other hand Coca-Cola Consolidated Inc. (NASDAQ:COKE) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Washington Real Estate Investment Trust (NYSE:WRE) is even less popular than COKE. Hedge funds dodged a bullet by taking a bearish stance towards WRE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately WRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WRE investors were disappointed as the stock returned -8.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
