Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of LTC Properties Inc (NYSE:LTC) and see how the stock is affected by the recent hedge fund activity.
LTC Properties Inc (NYSE:LTC) has experienced an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that LTC isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the new hedge fund action regarding LTC Properties Inc (NYSE:LTC).
How are hedge funds trading LTC Properties Inc (NYSE:LTC)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LTC over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in LTC Properties Inc (NYSE:LTC) was held by Renaissance Technologies, which reported holding $5.9 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $5.4 million position. Other investors bullish on the company included Two Sigma Advisors, Eversept Partners, and AQR Capital Management.
As aggregate interest increased, some big names were leading the bulls’ herd. Eversept Partners, managed by Kamran Moghtaderi, established the most outsized position in LTC Properties Inc (NYSE:LTC). Eversept Partners had $1.5 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with brand new LTC positions are Dmitry Balyasny’s Balyasny Asset Management and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as LTC Properties Inc (NYSE:LTC) but similarly valued. We will take a look at Cott Corporation (NYSE:COT), Core-Mark Holding Company, Inc. (NASDAQ:CORE), 21Vianet Group Inc (NASDAQ:VNET), and Amkor Technology, Inc. (NASDAQ:AMKR). This group of stocks’ market caps match LTC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COT | 27 | 415487 | -1 |
| CORE | 24 | 72451 | 0 |
| VNET | 17 | 51204 | -1 |
| AMKR | 19 | 73105 | -6 |
| Average | 21.75 | 153062 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $21 million in LTC’s case. Cott Corporation (NYSE:COT) is the most popular stock in this table. On the other hand 21Vianet Group Inc (NASDAQ:VNET) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks LTC Properties Inc (NYSE:LTC) is even less popular than VNET. Hedge funds clearly dropped the ball on LTC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on LTC as the stock returned 13.5% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
