How do we determine whether America First Multifamily Investors, L.P. (NASDAQ:ATAX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
America First Multifamily Investors, L.P. (NASDAQ:ATAX) has seen an increase in support from the world’s most elite money managers in recent months. ATAX was in 4 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with ATAX positions at the end of the previous quarter. Our calculations also showed that ATAX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s check out the key hedge fund action surrounding America First Multifamily Investors, L.P. (NASDAQ:ATAX).
What does smart money think about America First Multifamily Investors, L.P. (NASDAQ:ATAX)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. On the other hand, there were a total of 1 hedge funds with a bullish position in ATAX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in America First Multifamily Investors, L.P. (NASDAQ:ATAX), worth close to $2.2 million, accounting for less than 0.1%% of its total 13F portfolio. On Arrowstreet Capital’s heels is Citadel Investment Group, led by Ken Griffin, holding a $1.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Renaissance Technologies, Matthew Hulsizer’s PEAK6 Capital Management and . In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to America First Multifamily Investors, L.P. (NASDAQ:ATAX), around 0.01% of its 13F portfolio. PEAK6 Capital Management is also relatively very bullish on the stock, setting aside 0.0007 percent of its 13F equity portfolio to ATAX.
As one would reasonably expect, key hedge funds have been driving this bullishness. PEAK6 Capital Management, managed by Matthew Hulsizer, created the biggest position in America First Multifamily Investors, L.P. (NASDAQ:ATAX). PEAK6 Capital Management had $0.1 million invested in the company at the end of the quarter.
Let’s go over hedge fund activity in other stocks similar to America First Multifamily Investors, L.P. (NASDAQ:ATAX). We will take a look at Falcon Minerals Corporation (NASDAQ:FLMN), Azure Power Global Limited (NYSE:AZRE), Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT), and Old Line Bancshares, Inc. (NASDAQ:OLBK). All of these stocks’ market caps are similar to ATAX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLMN | 19 | 72785 | -3 |
| AZRE | 4 | 7526 | -2 |
| SBT | 5 | 7732 | -1 |
| OLBK | 11 | 50236 | 6 |
| Average | 9.75 | 34570 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $4 million in ATAX’s case. Falcon Minerals Corporation (NASDAQ:FLMN) is the most popular stock in this table. On the other hand Azure Power Global Limited (NYSE:AZRE) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks America First Multifamily Investors, L.P. (NASDAQ:ATAX) is even less popular than AZRE. Hedge funds dodged a bullet by taking a bearish stance towards ATAX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ATAX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ATAX investors were disappointed as the stock returned -9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
