The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Community Healthcare Trust Inc (NYSE:CHCT) and determine whether the smart money was really smart about this stock.
Is Community Healthcare Trust Inc (NYSE:CHCT) a good investment now? Investors who are in the know were taking a bearish view. The number of long hedge fund positions fell by 2 recently. Our calculations also showed that CHCT 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.
To most stock holders, hedge funds are perceived as underperforming, old investment tools of years past. While there are over 8000 funds trading at the moment, We choose to focus on the top tier of this club, about 850 funds. These hedge fund managers direct the majority of the hedge fund industry’s total capital, and by tracking their first-class picks, Insider Monkey has come up with numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Chuck Royce of Royce & Associates
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. With all of this in mind we’re going to analyze the new hedge fund action encompassing Community Healthcare Trust Inc (NYSE:CHCT).
How have hedgies been trading Community Healthcare Trust Inc (NYSE:CHCT)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in CHCT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Cardinal Capital held the most valuable stake in Community Healthcare Trust Inc (NYSE:CHCT), which was worth $47.6 million at the end of the third quarter. On the second spot was Clough Capital Partners which amassed $14.2 million worth of shares. Millennium Management, Royce & Associates, and Citadel Investment Group 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 Cardinal Capital allocated the biggest weight to Community Healthcare Trust Inc (NYSE:CHCT), around 2.34% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, earmarking 1.41 percent of its 13F equity portfolio to CHCT.
Since Community Healthcare Trust Inc (NYSE:CHCT) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of funds that decided to sell off their positions entirely heading into Q4. Interestingly, Michael Gelband’s ExodusPoint Capital dumped the biggest position of the 750 funds watched by Insider Monkey, valued at close to $0.4 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Community Healthcare Trust Inc (NYSE:CHCT). We will take a look at Armada Hoffler Properties Inc (NYSE:AHH), 1st Source Corporation (NASDAQ:SRCE), NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), and Freedom Holding Corp. (NASDAQ:FRHC). This group of stocks’ market values are similar to CHCT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AHH | 9 | 52378 | 3 |
| SRCE | 9 | 26778 | -1 |
| NGM | 12 | 64875 | 5 |
| FRHC | 3 | 9055 | 0 |
| Average | 8.25 | 38272 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $86 million in CHCT’s case. NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is the most popular stock in this table. On the other hand Freedom Holding Corp. (NASDAQ:FRHC) is the least popular one with only 3 bullish hedge fund positions. Community Healthcare Trust Inc (NYSE:CHCT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately CHCT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CHCT were disappointed as the stock returned 8.2% during the same time period 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
