We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like UDR, Inc. (NYSE:UDR).
UDR, Inc. (NYSE:UDR) has experienced an increase in enthusiasm from smart money recently. UDR was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with UDR positions at the end of the previous quarter. Our calculations also showed that UDR 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.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Heebner of Capital Growth Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the recent hedge fund action surrounding UDR, Inc. (NYSE:UDR).
Hedge fund activity in UDR, Inc. (NYSE:UDR)
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in UDR a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in UDR, Inc. (NYSE:UDR), worth close to $366.5 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $60.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish comprise Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Greg Poole’s Echo Street Capital Management. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to UDR, Inc. (NYSE:UDR), around 0.41% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, designating 0.31 percent of its 13F equity portfolio to UDR.
As one would reasonably expect, specific money managers have been driving this bullishness. Capital Growth Management, managed by Ken Heebner, established the most outsized position in UDR, Inc. (NYSE:UDR). Capital Growth Management had $5.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $2.9 million position during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Jeffrey Talpins’s Element Capital Management.
Let’s now review hedge fund activity in other stocks similar to UDR, Inc. (NYSE:UDR). These stocks are Banco de Chile (NYSE:BCH), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Live Nation Entertainment, Inc. (NYSE:LYV), and Campbell Soup Company (NYSE:CPB). All of these stocks’ market caps are closest to UDR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCH | 4 | 66263 | -2 |
| TTWO | 57 | 1596551 | -3 |
| LYV | 40 | 1097828 | 1 |
| CPB | 31 | 972740 | 5 |
| Average | 33 | 933346 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $933 million. That figure was $560 million in UDR’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 4 bullish hedge fund positions. UDR, Inc. (NYSE:UDR) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately UDR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UDR investors were disappointed as the stock returned -0.2% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
