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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Physicians Realty Trust (NYSE:DOC).
Physicians Realty Trust (NYSE:DOC) was in 11 hedge funds’ portfolios at the end of the fourth quarter of 2019. DOC investors should be aware of a decrease in enthusiasm from smart money of late. There were 15 hedge funds in our database with DOC holdings at the end of the previous quarter. Our calculations also showed that DOC 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).
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’ 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 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 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.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the recent hedge fund action regarding Physicians Realty Trust (NYSE:DOC).
What have hedge funds been doing with Physicians Realty Trust (NYSE:DOC)?
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DOC over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Physicians Realty Trust (NYSE:DOC), with a stake worth $50.2 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $24.6 million. Marshall Wace LLP, Alyeska Investment Group, and Polaris 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 Neo Ivy Capital allocated the biggest weight to Physicians Realty Trust (NYSE:DOC), around 0.16% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 0.11 percent of its 13F equity portfolio to DOC.
Seeing as Physicians Realty Trust (NYSE:DOC) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that slashed their positions entirely last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $16.4 million in stock, and Andrew Sandler’s Sandler Capital Management was right behind this move, as the fund said goodbye to about $7.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Physicians Realty Trust (NYSE:DOC). These stocks are Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Simpson Manufacturing Co, Inc. (NYSE:SSD), White Mountains Insurance Group Ltd (NYSE:WTM), and BlackBerry Limited (NYSE:BB). This group of stocks’ market caps match DOC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSOD | 29 | 725972 | 7 |
| SSD | 24 | 284021 | 9 |
| WTM | 16 | 163990 | -1 |
| BB | 27 | 470870 | -3 |
| Average | 24 | 411213 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $411 million. That figure was $95 million in DOC’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Physicians Realty Trust (NYSE:DOC) is even less popular than WTM. Hedge funds dodged a bullet by taking a bearish stance towards DOC. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately DOC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DOC investors were disappointed as the stock returned -25.1% 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 so far in 2020.
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.
