Hedge Funds Warming Up To BRT Apartments Corp (BRT)

In this article you are going to find out whether hedge funds think BRT Apartments Corp (NYSE:BRT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

BRT Apartments Corp (NYSE:BRT) investors should pay attention to an increase in support from the world’s most elite money managers of late. BRT was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with BRT holdings at the end of the previous quarter. Our calculations also showed that BRT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 S&P 500 ETFs by more than 58 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 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.

Israel Englander of Millennium Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action surrounding BRT Apartments Corp (NYSE:BRT).

How are hedge funds trading BRT Apartments Corp (NYSE:BRT)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in BRT a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in BRT Apartments Corp (NYSE:BRT), which was worth $7.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $0.8 million worth of shares. Winton Capital Management, Marshall Wace LLP, and Two Sigma Advisors 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 Bailard Inc allocated the biggest weight to BRT Apartments Corp (NYSE:BRT), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to BRT.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in BRT Apartments Corp (NYSE:BRT). Arrowstreet Capital had $0.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.3 million position during the quarter. The only other fund with a brand new BRT position is Thomas Bailard’s Bailard Inc.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BRT Apartments Corp (NYSE:BRT) but similarly valued. We will take a look at Oasis Midstream Partners LP (NASDAQ:OMP), Immersion Corporation (NASDAQ:IMMR), Concrete Pumping Holdings, Inc. (NASDAQ:BBCP), and Fossil Group Inc (NASDAQ:FOSL). All of these stocks’ market caps are closest to BRT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $10 million in BRT’s case. Immersion Corporation (NASDAQ:IMMR) is the most popular stock in this table. On the other hand Oasis Midstream Partners LP (NASDAQ:OMP) is the least popular one with only 3 bullish hedge fund positions. BRT Apartments Corp (NYSE:BRT) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately BRT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BRT investors were disappointed as the stock returned 17.5% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.