Is Duke Realty Corporation (NYSE:DRE) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Duke Realty Corporation (NYSE:DRE) a buy here? The best stock pickers are taking a bearish view. The number of long hedge fund bets went down by 7 lately. Our calculations also showed that DRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the fresh hedge fund action encompassing Duke Realty Corporation (NYSE:DRE).
What have hedge funds been doing with Duke Realty Corporation (NYSE:DRE)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the second quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in DRE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the number one position in Duke Realty Corporation (NYSE:DRE), worth close to $51.1 million, corresponding to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Winton Capital Management, managed by David Harding, which holds a $30.8 million position; 0.4% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism consist of Renaissance Technologies, David E. Shaw’s D E Shaw and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to Duke Realty Corporation (NYSE:DRE), around 0.41% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.36 percent of its 13F equity portfolio to DRE.
Seeing as Duke Realty Corporation (NYSE:DRE) has experienced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies who sold off their positions entirely last quarter. It’s worth mentioning that Jeffrey Furber’s AEW Capital Management cut the biggest investment of all the hedgies tracked by Insider Monkey, valued at about $130.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $39.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 7 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Duke Realty Corporation (NYSE:DRE). We will take a look at Steris Plc (NYSE:STE), Paycom Software Inc (NYSE:PAYC), Liberty Global Plc (NASDAQ:LBTYK), and Fidelity National Financial Inc (NYSE:FNF). This group of stocks’ market valuations resemble DRE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STE | 28 | 388702 | 6 |
| PAYC | 31 | 413981 | 7 |
| LBTYK | 38 | 3404866 | 4 |
| FNF | 28 | 340609 | -1 |
| Average | 31.25 | 1137040 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1137 million. That figure was $171 million in DRE’s case. Liberty Global Plc (NASDAQ:LBTYK) is the most popular stock in this table. On the other hand Steris Plc (NYSE:STE) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Duke Realty Corporation (NYSE:DRE) is even less popular than STE. Hedge funds dodged a bullet by taking a bearish stance towards DRE. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DRE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DRE investors were disappointed as the stock returned 4.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
