Hedge funds are known to underperform the bull markets but that’s not because they are terrible at stock picking. Hedge funds underperform because their net exposure in only 40-70% and they charge exorbitant fees. No one knows what the future holds and how market participants will react to the bountiful news that floods in each day. However, hedge funds’ consensus picks on average deliver market beating returns. For example in the first 9 months of this year through September 30th the Standard and Poor’s 500 Index returned approximately 20% (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Interestingly, an average long/short hedge fund returned only a fraction of this value due to the hedges they implemented and the large fees they charged. If you pay attention to the actual hedge fund returns versus the returns of their long stock picks, you might believe that it is a waste of time to analyze hedge funds’ purchases. We know better. That’s why we scrutinize hedge fund sentiment before we invest in a stock like Landmark Infrastructure Partners LP (NASDAQ:LMRK).
Is Landmark Infrastructure Partners LP (NASDAQ:LMRK) going to take off soon? The best stock pickers are in a bearish mood. The number of bullish hedge fund positions retreated by 1 in recent months. Our calculations also showed that LMRK isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are assumed to be slow, old investment vehicles of the past. While there are over 8000 funds with their doors open at the moment, We look at the aristocrats of this club, about 750 funds. These investment experts direct most of the hedge fund industry’s total asset base, and by watching their unrivaled investments, Insider Monkey has deciphered a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let’s check out the fresh hedge fund action regarding Landmark Infrastructure Partners LP (NASDAQ:LMRK).
What does smart money think about Landmark Infrastructure Partners LP (NASDAQ:LMRK)?
At the end of the second quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LMRK over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Landmark Infrastructure Partners LP (NASDAQ:LMRK). Citadel Investment Group has a $1.5 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Frederick DiSanto of Ancora Advisors, with a $1.2 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Ken Griffin’s Citadel Investment Group, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital and Matthew Hulsizer’s PEAK6 Capital Management.
Seeing as Landmark Infrastructure Partners LP (NASDAQ:LMRK) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there exists a select few money managers who sold off their entire stakes last quarter. Interestingly, Renaissance Technologies dumped the biggest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $0.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Landmark Infrastructure Partners LP (NASDAQ:LMRK) but similarly valued. We will take a look at Sierra Bancorp (NASDAQ:BSRR), Shoe Carnival, Inc. (NASDAQ:SCVL), Dynex Capital Inc (NYSE:DX), and Fluent, Inc. (NASDAQ:FLNT). This group of stocks’ market valuations match LMRK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSRR | 7 | 17254 | 1 |
| SCVL | 14 | 62738 | -3 |
| DX | 6 | 13253 | -2 |
| FLNT | 9 | 5665 | 0 |
| Average | 9 | 24728 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $2 million in LMRK’s case. Shoe Carnival, Inc. (NASDAQ:SCVL) is the most popular stock in this table. On the other hand Dynex Capital Inc (NYSE:DX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Landmark Infrastructure Partners LP (NASDAQ:LMRK) is even less popular than DX. Hedge funds clearly dropped the ball on LMRK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on LMRK as the stock returned 9.5% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
