We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Camden Property Trust (NYSE:CPT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Camden Property Trust (NYSE:CPT) going to take off soon? Prominent investors are becoming hopeful. The number of long hedge fund positions went up by 9 lately. Our calculations also showed that CPT 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).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
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. Now let’s take a glance at the recent hedge fund action encompassing Camden Property Trust (NYSE:CPT).
What does smart money think about Camden Property Trust (NYSE:CPT)?
At Q4’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in CPT a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Camden Property Trust (NYSE:CPT) was held by Millennium Management, which reported holding $110 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $96 million position. Other investors bullish on the company included Balyasny Asset Management, Renaissance Technologies, and AQR Capital Management. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Camden Property Trust (NYSE:CPT), around 3.9% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, earmarking 3.27 percent of its 13F equity portfolio to CPT.
As aggregate interest increased, specific money managers were breaking ground themselves. Waterfront Capital Partners, managed by Eduardo Abush, created the biggest position in Camden Property Trust (NYSE:CPT). Waterfront Capital Partners had $21.5 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $6.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Crandall Gilman’s Hill Winds Capital, Mario Gabelli’s GAMCO Investors, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Camden Property Trust (NYSE:CPT) but similarly valued. These stocks are Huntington Ingalls Industries Inc (NYSE:HII), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), E*TRADE Financial Corporation (NASDAQ:ETFC), and Reinsurance Group of America Inc (NYSE:RGA). All of these stocks’ market caps are similar to CPT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HII | 22 | 596671 | 3 |
| CRWD | 48 | 613093 | 19 |
| ETFC | 48 | 946730 | 4 |
| RGA | 27 | 412374 | 1 |
| Average | 36.25 | 642217 | 6.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $642 million. That figure was $471 million in CPT’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Huntington Ingalls Industries Inc (NYSE:HII) is the least popular one with only 22 bullish hedge fund positions. Camden Property Trust (NYSE:CPT) 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 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately CPT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CPT investors were disappointed as the stock returned -25.7% during the same time period 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 most of these stocks already outperformed the market in Q1.
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.
