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. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Federal Realty Investment Trust (NYSE:FRT).
Is Federal Realty Investment Trust (NYSE:FRT) a bargain? The smart money is in a bearish mood. The number of bullish hedge fund positions were cut by 4 lately. Our calculations also showed that FRT 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). FRT was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with FRT positions at the end of the previous quarter.
In the eyes of most stock holders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the top tier of this club, around 850 funds. These money managers handle bulk of the hedge fund industry’s total asset base, and by observing their first-class stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Phill Gross of Adage Capital 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 let’s take a glance at the fresh hedge fund action surrounding Federal Realty Investment Trust (NYSE:FRT).
Hedge fund activity in Federal Realty Investment Trust (NYSE:FRT)
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FRT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Federal Realty Investment Trust (NYSE:FRT) was held by Renaissance Technologies, which reported holding $16 million worth of stock at the end of September. It was followed by Winton Capital Management with a $15.9 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Federal Realty Investment Trust (NYSE:FRT), around 0.84% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.22 percent of its 13F equity portfolio to FRT.
Judging by the fact that Federal Realty Investment Trust (NYSE:FRT) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $48.3 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also sold off its stock, about $4.2 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Federal Realty Investment Trust (NYSE:FRT) but similarly valued. We will take a look at Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Universal Display Corporation (NASDAQ:OLED), MGM Growth Properties LLC (NYSE:MGP), and 58.com Inc (NYSE:WUBA). This group of stocks’ market caps are similar to FRT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVAL | 7 | 22903 | 0 |
| OLED | 31 | 329009 | 5 |
| MGP | 29 | 815269 | 8 |
| WUBA | 21 | 475926 | -5 |
| Average | 22 | 410777 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $411 million. That figure was $109 million in FRT’s case. Universal Display Corporation (NASDAQ:OLED) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 7 bullish hedge fund positions. Federal Realty Investment Trust (NYSE:FRT) 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 FRT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FRT investors were disappointed as the stock returned -33.2% 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.
