Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Public Storage (NYSE:PSA).
Is Public Storage (NYSE:PSA) going to take off soon? The smart money is in an optimistic mood. The number of bullish hedge fund bets went up by 2 in recent months. Our calculations also showed that PSA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 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.
Noam Gottesman of GLG Partners
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. With all of this in mind let’s take a look at the fresh hedge fund action regarding Public Storage (NYSE:PSA).
Hedge fund activity in Public Storage (NYSE:PSA)
Heading into the first quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in PSA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Public Storage (NYSE:PSA), with a stake worth $326.2 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $168 million. Alkeon Capital Management, Arrowstreet Capital, and GLG Partners 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 Hill Winds Capital allocated the biggest weight to Public Storage (NYSE:PSA), around 4.95% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, designating 3.44 percent of its 13F equity portfolio to PSA.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Public Storage (NYSE:PSA). Balyasny Asset Management had $30.3 million invested in the company at the end of the quarter. Greg Poole’s Echo Street Capital Management also initiated a $16.6 million position during the quarter. The other funds with brand new PSA positions are Matthew Crandall Gilman’s Hill Winds Capital, Daniel S. Och’s OZ Management, and Jed Nussdorf’s Soapstone Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Public Storage (NYSE:PSA) but similarly valued. We will take a look at Canadian Imperial Bank of Commerce (NYSE:CM), Ford Motor Company (NYSE:F), Roper Technologies, Inc. (NYSE:ROP), and Occidental Petroleum Corporation (NYSE:OXY). All of these stocks’ market caps are closest to PSA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CM | 14 | 240820 | -3 |
| F | 36 | 1104113 | -4 |
| ROP | 40 | 1248081 | -1 |
| OXY | 44 | 2305548 | -18 |
| Average | 33.5 | 1224641 | -6.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $1225 million. That figure was $927 million in PSA’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 14 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on PSA as the stock returned 3.5% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
