Hedge Funds Done Buying Public Storage (PSA)?

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 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Public Storage (NYSE:PSA).

Public Storage (NYSE:PSA) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of March. At the end of this article we will also compare PSA to other stocks including Autodesk, Inc. (NASDAQ:ADSK), Keurig Dr Pepper Inc. (NYSE:KDP), and Atlassian Corporation Plc (NASDAQ:TEAM) to get a better sense of its popularity.

Video: 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 S&P 500 ETFs by 58 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 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.

Martin Whitman of Third Avenue Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the latest hedge fund action regarding Public Storage (NYSE:PSA).

What have hedge funds been doing with Public Storage (NYSE:PSA)?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in PSA 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Public Storage (NYSE:PSA), worth close to $292.4 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $174.1 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism contain Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Public Storage (NYSE:PSA), around 10.7% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 2.98 percent of its 13F equity portfolio to PSA.

Due to the fact that Public Storage (NYSE:PSA) has faced bearish sentiment from the smart money, we can see that there exists a select few hedge funds who were dropping their positions entirely last quarter. It’s worth mentioning that Greg Poole’s Echo Street Capital Management dropped the biggest position of the 750 funds watched by Insider Monkey, worth an estimated $16.6 million in stock. Matthew Crandall Gilman’s fund, Hill Winds Capital, also said goodbye to its stock, about $7.3 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Public Storage (NYSE:PSA). These stocks are Autodesk, Inc. (NASDAQ:ADSK), Keurig Dr Pepper Inc. (NYSE:KDP), Atlassian Corporation Plc (NASDAQ:TEAM), and Thomson Reuters Corporation (NYSE:TRI). This group of stocks’ market valuations are closest to PSA’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $1520 million. That figure was $807 million in PSA’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Thomson Reuters Corporation (NYSE:TRI) is the least popular one with only 22 bullish hedge fund positions. Public Storage (NYSE:PSA) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately PSA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PSA investors were disappointed as the stock returned 2.1% during the second 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.

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