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 (read our latest 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 Mid America Apartment Communities Inc (NYSE:MAA) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Mid America Apartment Communities Inc (NYSE:MAA) shareholders have witnessed an increase in hedge fund sentiment in recent months. Our calculations also showed that MAA 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.
Ken Fisher of Fisher Asset 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. Now we’re going to go over the recent hedge fund action surrounding Mid America Apartment Communities Inc (NYSE:MAA).
How have hedgies been trading Mid America Apartment Communities Inc (NYSE:MAA)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MAA over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the number one position in Mid America Apartment Communities Inc (NYSE:MAA), worth close to $50.2 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund manager is Diamond Hill Capital, managed by Ric Dillon, which holds a $47.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Israel Englander’s Millennium Management, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to Mid America Apartment Communities Inc (NYSE:MAA), around 0.77% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to MAA.
Consequently, key money managers were leading the bulls’ herd. OZ Management, managed by Daniel S. Och, established the most outsized position in Mid America Apartment Communities Inc (NYSE:MAA). OZ Management had $2.4 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also made a $1.6 million investment in the stock during the quarter. The other funds with brand new MAA positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Ran Pang’s Quantamental Technologies.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mid America Apartment Communities Inc (NYSE:MAA) but similarly valued. We will take a look at Westinghouse Air Brake Technologies Corp (NYSE:WAB), Wynn Resorts, Limited (NASDAQ:WYNN), Campbell Soup Company (NYSE:CPB), and Diamondback Energy Inc (NASDAQ:FANG). This group of stocks’ market valuations match MAA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WAB | 41 | 2013819 | 5 |
| WYNN | 44 | 1066566 | 6 |
| CPB | 29 | 1025914 | -5 |
| FANG | 44 | 712696 | 0 |
| Average | 39.5 | 1204749 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1205 million. That figure was $234 million in MAA’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Campbell Soup Company (NYSE:CPB) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Mid America Apartment Communities Inc (NYSE:MAA) is even less popular than CPB. Hedge funds clearly dropped the ball on MAA 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 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 still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on MAA as the stock returned -19.8% during the same time period and outperformed the market by an even larger margin.
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.
