Hedge Funds Aren’t Crazy About Arbor Realty Trust, Inc. (ABR) Anymore

In this article you are going to find out whether hedge funds think Arbor Realty Trust, Inc. (NYSE:ABR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Arbor Realty Trust, Inc. (NYSE:ABR) a buy, sell, or hold? Prominent investors are getting less bullish. The number of bullish hedge fund positions went down by 7 recently. Our calculations also showed that ABR 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the fresh hedge fund action surrounding Arbor Realty Trust, Inc. (NYSE:ABR).

Hedge fund activity in Arbor Realty Trust, Inc. (NYSE:ABR)

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the fourth quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in ABR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Omega Advisors held the most valuable stake in Arbor Realty Trust, Inc. (NYSE:ABR), which was worth $13.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $6.6 million worth of shares. Winton Capital Management, Indaba Capital Management, and Marshall Wace LLP 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 Omega Advisors allocated the biggest weight to Arbor Realty Trust, Inc. (NYSE:ABR), around 1.7% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, designating 1.53 percent of its 13F equity portfolio to ABR.

Seeing as Arbor Realty Trust, Inc. (NYSE:ABR) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dumped the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $3 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $2.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Arbor Realty Trust, Inc. (NYSE:ABR). We will take a look at LendingClub Corp (NYSE:LC), Seacor Holdings, Inc. (NYSE:CKH), ScanSource, Inc. (NASDAQ:SCSC), and Warrior Met Coal Inc. (NYSE:HCC). This group of stocks’ market caps are similar to ABR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $38 million in ABR’s case. Warrior Met Coal Inc. (NYSE:HCC) is the most popular stock in this table. On the other hand LendingClub Corp (NYSE:LC) is the least popular one with only 7 bullish hedge fund positions. Arbor Realty Trust, Inc. (NYSE:ABR) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on ABR as the stock returned 105.7% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.