We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards JBG SMITH Properties (NYSE:JBGS).
Is JBG SMITH Properties (NYSE:JBGS) a cheap stock to buy now? The smart money is in a bearish mood. The number of long hedge fund bets dropped by 1 in recent months. Our calculations also showed that JBGS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Martin Whitman of Third Avenue Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the new hedge fund action encompassing JBG SMITH Properties (NYSE:JBGS).
How have hedgies been trading JBG SMITH Properties (NYSE:JBGS)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in JBGS over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Long Pond Capital, managed by John Khoury, holds the biggest position in JBG SMITH Properties (NYSE:JBGS). Long Pond Capital has a $107 million position in the stock, comprising 2.7% of its 13F portfolio. The second most bullish fund manager is Third Avenue Management, managed by Martin Whitman, which holds a $48.7 million position; 4.8% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism comprise John Petry’s Sessa Capital, Joshua Nash’s Ulysses Management and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to JBG SMITH Properties (NYSE:JBGS), around 4.82% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, earmarking 4.54 percent of its 13F equity portfolio to JBGS.
Because JBG SMITH Properties (NYSE:JBGS) has faced declining sentiment from the smart money, logic holds that there was a specific group of money managers who were dropping their entire stakes in the third quarter. It’s worth mentioning that Stuart J. Zimmer’s Zimmer Partners dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $17.1 million in stock, and Vivian Lau’s One Tusk Investment Partners was right behind this move, as the fund cut about $9.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as JBG SMITH Properties (NYSE:JBGS) but similarly valued. These stocks are Cimarex Energy Co (NYSE:XEC), The New York Times Company (NYSE:NYT), Air Lease Corp (NYSE:AL), and Eaton Vance Corp (NYSE:EV). This group of stocks’ market caps match JBGS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XEC | 33 | 976357 | 1 |
| NYT | 35 | 1407752 | -3 |
| AL | 23 | 465385 | -1 |
| EV | 24 | 57872 | 7 |
| Average | 28.75 | 726842 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $727 million. That figure was $270 million in JBGS’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Air Lease Corp (NYSE:AL) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks JBG SMITH Properties (NYSE:JBGS) is even less popular than AL. Hedge funds dodged a bullet by taking a bearish stance towards JBGS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately JBGS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); JBGS investors were disappointed as the stock returned -29.3% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
