How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Healthcare Realty Trust Inc (NYSE:HR) and determine whether hedge funds had an edge regarding this stock.
Healthcare Realty Trust Inc (NYSE:HR) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. HR has seen an increase in activity from the world’s largest hedge funds of late. There were 11 hedge funds in our database with HR holdings at the end of March. Our calculations also showed that HR 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.
According to most market participants, hedge funds are perceived as unimportant, old financial tools of years past. While there are over 8000 funds in operation at present, Our experts look at the masters of this group, around 850 funds. These money managers oversee bulk of the smart money’s total capital, and by observing their matchless investments, Insider Monkey has discovered several investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Clint Carlson of Carlson Capital
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. Now we’re going to take a gander at the fresh hedge fund action surrounding Healthcare Realty Trust Inc (NYSE:HR).
How have hedgies been trading Healthcare Realty Trust Inc (NYSE:HR)?
At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in HR 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.
The largest stake in Healthcare Realty Trust Inc (NYSE:HR) was held by Zimmer Partners, which reported holding $63.3 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $22.1 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Impax Asset Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Healthcare Realty Trust Inc (NYSE:HR), around 0.86% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, earmarking 0.19 percent of its 13F equity portfolio to HR.
Consequently, some big names have been driving this bullishness. Zimmer Partners, managed by Stuart J. Zimmer, created the largest position in Healthcare Realty Trust Inc (NYSE:HR). Zimmer Partners had $63.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $22.1 million position during the quarter. The other funds with brand new HR positions are Clint Carlson’s Carlson Capital, Michael Gelband’s ExodusPoint Capital, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Healthcare Realty Trust Inc (NYSE:HR) but similarly valued. We will take a look at JBG SMITH Properties (NYSE:JBGS), Eldorado Resorts Inc (NASDAQ:ERI), Hawaiian Electric Industries, Inc. (NYSE:HE), Envestnet Inc (NYSE:ENV), China Biologic Products Holdings Inc (NASDAQ:CBPO), Hanesbrands Inc. (NYSE:HBI), and Natera Inc (NASDAQ:NTRA). All of these stocks’ market caps are similar to HR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JBGS | 25 | 283097 | 5 |
| ERI | 49 | 733973 | 10 |
| HE | 16 | 159237 | 3 |
| ENV | 19 | 85387 | 2 |
| CBPO | 23 | 774587 | 7 |
| HBI | 31 | 543895 | -5 |
| NTRA | 35 | 634417 | 3 |
| Average | 28.3 | 459228 | 3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $459 million. That figure was $156 million in HR’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 16 bullish hedge fund positions. Healthcare Realty Trust Inc (NYSE:HR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HR is 49.1. 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 HR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HR investors were disappointed as the stock returned 4% 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.
