At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Independence Realty Trust Inc (NYSE:IRT).
Is Independence Realty Trust Inc (NYSE:IRT) ready to rally soon? Investors who are in the know are taking a bullish view. The number of bullish hedge fund bets moved up by 9 recently. Our calculations also showed that IRT 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). IRT was in 16 hedge funds’ portfolios at the end of March. There were 7 hedge funds in our database with IRT positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
James Dondero of Highland Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action surrounding Independence Realty Trust Inc (NYSE:IRT).
What have hedge funds been doing with Independence Realty Trust Inc (NYSE:IRT)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 129% from the fourth quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in IRT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Independence Realty Trust Inc (NYSE:IRT), with a stake worth $57.3 million reported as of the end of September. Trailing Renaissance Technologies was Luminus Management, which amassed a stake valued at $5.7 million. Marshall Wace LLP, Arrowstreet Capital, and Highland 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 Pinz Capital allocated the biggest weight to Independence Realty Trust Inc (NYSE:IRT), around 3.6% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, setting aside 0.83 percent of its 13F equity portfolio to IRT.
As aggregate interest increased, specific money managers have jumped into Independence Realty Trust Inc (NYSE:IRT) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, created the biggest position in Independence Realty Trust Inc (NYSE:IRT). Luminus Management had $5.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $5.7 million position during the quarter. The following funds were also among the new IRT investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management, and Matthew L Pinz’s Pinz Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Independence Realty Trust Inc (NYSE:IRT) but similarly valued. We will take a look at EnPro Industries, Inc. (NYSE:NPO), United Fire Group, Inc. (NASDAQ:UFCS), The Gorman-Rupp Company (NYSE:GRC), and Group 1 Automotive, Inc. (NYSE:GPI). This group of stocks’ market valuations are closest to IRT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NPO | 14 | 103189 | 0 |
| UFCS | 5 | 7690 | -1 |
| GRC | 8 | 41746 | -1 |
| GPI | 15 | 96849 | -7 |
| Average | 10.5 | 62369 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $88 million in IRT’s case. Group 1 Automotive, Inc. (NYSE:GPI) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Independence Realty Trust Inc (NYSE:IRT) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on IRT as the stock returned 26.6% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
