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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Ventas, Inc. (NYSE:VTR) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Ventas, Inc. (NYSE:VTR) shareholders have witnessed an increase in hedge fund sentiment recently. VTR was in 29 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with VTR holdings at the end of the previous quarter. Our calculations also showed that VTR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny 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. Keeping this in mind we’re going to check out the new hedge fund action encompassing Ventas, Inc. (NYSE:VTR).
How are hedge funds trading Ventas, Inc. (NYSE:VTR)?
At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 81% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in VTR a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Long Pond Capital was the largest shareholder of Ventas, Inc. (NYSE:VTR), with a stake worth $239.5 million reported as of the end of September. Trailing Long Pond Capital was Renaissance Technologies, which amassed a stake valued at $214.9 million. Camber Capital Management, Echo Street Capital Management, and Adage Capital 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 Long Pond Capital allocated the biggest weight to Ventas, Inc. (NYSE:VTR), around 6.12% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, dishing out 4.07 percent of its 13F equity portfolio to VTR.
As aggregate interest increased, specific money managers have been driving this bullishness. Long Pond Capital, managed by John Khoury, created the most valuable position in Ventas, Inc. (NYSE:VTR). Long Pond Capital had $239.5 million invested in the company at the end of the quarter. Stephen DuBois’s Camber Capital Management also initiated a $43.3 million position during the quarter. The following funds were also among the new VTR investors: Greg Poole’s Echo Street Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Stuart J. Zimmer’s Zimmer Partners.
Let’s now take a look at hedge fund activity in other stocks similar to Ventas, Inc. (NYSE:VTR). These stocks are Halliburton Company (NYSE:HAL), Sprint Corporation (NYSE:S), ORIX Corporation (NYSE:IX), and Wipro Limited (NYSE:WIT). This group of stocks’ market valuations match VTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HAL | 31 | 1208089 | -4 |
| S | 35 | 778974 | 11 |
| IX | 6 | 8292 | 1 |
| WIT | 12 | 98211 | 0 |
| Average | 21 | 523392 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $523 million. That figure was $656 million in VTR’s case. Sprint Corporation (NYSE:S) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 bullish hedge fund positions. Ventas, Inc. (NYSE:VTR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately VTR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VTR were disappointed as the stock returned -34.3% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
