Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Rexford Industrial Realty Inc (NYSE:REXR) makes for a good investment right now.
Rexford Industrial Realty Inc (NYSE:REXR) shareholders have witnessed an increase in enthusiasm from smart money of late. REXR was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 19 hedge funds in our database with REXR positions at the end of the previous quarter. Our calculations also showed that REXR 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).
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 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 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 stocks that are in our short portfolio.
Israel Englander of Millennium 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. With all of this in mind let’s go over the latest hedge fund action encompassing Rexford Industrial Realty Inc (NYSE:REXR).
How have hedgies been trading Rexford Industrial Realty Inc (NYSE:REXR)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards REXR over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Rexford Industrial Realty Inc (NYSE:REXR), with a stake worth $11.2 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $10.1 million. Brasada Capital Management, Driehaus Capital, and Fisher Asset Management 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 Brasada Capital Management allocated the biggest weight to Rexford Industrial Realty Inc (NYSE:REXR), around 1.95% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.76 percent of its 13F equity portfolio to REXR.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, initiated the biggest position in Rexford Industrial Realty Inc (NYSE:REXR). Springbok Capital had $1.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new REXR investors: Paul Tudor Jones’s Tudor Investment Corp, Renee Yao’s Neo Ivy Capital, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Rexford Industrial Realty Inc (NYSE:REXR) but similarly valued. We will take a look at Cosan Limited (NYSE:CZZ), Radian Group Inc (NYSE:RDN), Life Storage, Inc. (NYSE:LSI), and Empire State Realty Trust Inc (NYSE:ESRT). This group of stocks’ market caps are similar to REXR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CZZ | 12 | 300249 | -3 |
| RDN | 29 | 207932 | 5 |
| LSI | 20 | 217016 | 2 |
| ESRT | 18 | 115056 | 7 |
| Average | 19.75 | 210063 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $50 million in REXR’s case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 12 bullish hedge fund positions. Rexford Industrial Realty Inc (NYSE:REXR) is not the most popular stock in this group but hedge fund interest is still above 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on REXR, though not to the same extent, as the stock returned -21.5% during the first two and a half months of 2020 (through March 25th) and outperformed the market as well.
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.
