At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Duke Realty Corporation (NYSE:DRE) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Duke Realty Corporation (NYSE:DRE) shareholders have witnessed an increase in support from the world’s most elite money managers recently. Duke Realty Corporation (NYSE:DRE) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that DRE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to analyze the recent hedge fund action regarding Duke Realty Corporation (NYSE:DRE).
What have hedge funds been doing with Duke Realty Corporation (NYSE:DRE)?
Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DRE over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Duke Realty Corporation (NYSE:DRE), which was worth $32.4 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $14.6 million worth of shares. Millennium Management, Gillson Capital, and Two Sigma Advisors 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 Gillson Capital allocated the biggest weight to Duke Realty Corporation (NYSE:DRE), around 1.45% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to DRE.
Consequently, key hedge funds have jumped into Duke Realty Corporation (NYSE:DRE) headfirst. Millennium Management, managed by Israel Englander, assembled the biggest position in Duke Realty Corporation (NYSE:DRE). Millennium Management had $14 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also made a $8.1 million investment in the stock during the quarter. The following funds were also among the new DRE investors: Donald Sussman’s Paloma Partners, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks similar to Duke Realty Corporation (NYSE:DRE). We will take a look at Steris Plc (NYSE:STE), EXACT Sciences Corporation (NASDAQ:EXAS), Pinterest, Inc. (NYSE:PINS), Avangrid, Inc. (NYSE:AGR), Burlington Stores Inc (NYSE:BURL), Synchrony Financial (NYSE:SYF), and FMC Corporation (NYSE:FMC). This group of stocks’ market values match DRE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STE | 40 | 545240 | 5 |
| EXAS | 43 | 993223 | 9 |
| PINS | 53 | 1067483 | 15 |
| AGR | 18 | 132976 | 0 |
| BURL | 38 | 1475273 | -2 |
| SYF | 46 | 1563925 | 9 |
| FMC | 42 | 548601 | 3 |
| Average | 40 | 903817 | 5.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $904 million. That figure was $103 million in DRE’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Avangrid, Inc. (NYSE:AGR) is the least popular one with only 18 bullish hedge fund positions. Duke Realty Corporation (NYSE:DRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DRE is 33.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately DRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DRE investors were disappointed as the stock returned 4.9% in the third quarter 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
