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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Alexandria Real Estate Equities Inc (NYSE:ARE).
Is Alexandria Real Estate Equities Inc (NYSE:ARE) the right investment to pursue these days? The best stock pickers are turning bullish. The number of long hedge fund bets went up by 8 lately. Our calculations also showed that ARE 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). ARE was in 29 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with ARE positions 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.
Dmitry Balyasny of Balyasny 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 trades like this one as well as this tiny cannabis play. 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. With all of this in mind we’re going to view the recent hedge fund action surrounding Alexandria Real Estate Equities Inc (NYSE:ARE).
How are hedge funds trading Alexandria Real Estate Equities Inc (NYSE:ARE)?
At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the fourth quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in ARE a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Alexandria Real Estate Equities Inc (NYSE:ARE), with a stake worth $29.1 million reported as of the end of September. Trailing Millennium Management was Land & Buildings Investment Management, which amassed a stake valued at $25.3 million. Adage Capital Management, Balyasny Asset Management, and Renaissance Technologies 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 Land & Buildings Investment Management allocated the biggest weight to Alexandria Real Estate Equities Inc (NYSE:ARE), around 10.21% of its 13F portfolio. LDR Capital is also relatively very bullish on the stock, dishing out 5.81 percent of its 13F equity portfolio to ARE.
Consequently, key hedge funds have jumped into Alexandria Real Estate Equities Inc (NYSE:ARE) headfirst. Land & Buildings Investment Management, managed by Jonathan Litt, established the largest position in Alexandria Real Estate Equities Inc (NYSE:ARE). Land & Buildings Investment Management had $25.3 million invested in the company at the end of the quarter. Renaissance Technologies also made a $16.5 million investment in the stock during the quarter. The other funds with new positions in the stock are George McCabe’s Portolan Capital Management, Kamyar Khajavi’s MIK Capital, and Lawrence Raiman’s LDR Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Alexandria Real Estate Equities Inc (NYSE:ARE) but similarly valued. We will take a look at TransDigm Group Incorporated (NYSE:TDG), Williams Companies, Inc. (NYSE:WMB), Realty Income Corporation (NYSE:O), and New Oriental Education & Technology Group Inc. (NYSE:EDU). This group of stocks’ market values match ARE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TDG | 58 | 3800759 | -5 |
| WMB | 47 | 552828 | 7 |
| O | 25 | 225190 | -1 |
| EDU | 42 | 1555475 | -8 |
| Average | 43 | 1533563 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1534 million. That figure was $196 million in ARE’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Realty Income Corporation (NYSE:O) is the least popular one with only 25 bullish hedge fund positions. Alexandria Real Estate Equities Inc (NYSE:ARE) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately ARE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ARE investors were disappointed as the stock returned 12.2% during the second 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.
Follow Alexandria Real Estate Equities Inc. (NYSE:ARE)
Follow Alexandria Real Estate Equities Inc. (NYSE:ARE)
Disclosure: None. This article was originally published at Insider Monkey.
