Does QTS Realty Trust Inc (NYSE:QTS) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
QTS Realty Trust Inc (NYSE:QTS) investors should be aware of an increase in support from the world’s most elite money managers of late. Our calculations also showed that qts isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Let’s view the recent hedge fund action encompassing QTS Realty Trust Inc (NYSE:QTS).
What have hedge funds been doing with QTS Realty Trust Inc (NYSE:QTS)?
Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 46% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in QTS heading into this year. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the largest position in QTS Realty Trust Inc (NYSE:QTS). Zimmer Partners has a $103.5 million position in the stock, comprising 1.4% of its 13F portfolio. Coming in second is Land & Buildings Investment Management, managed by Jonathan Litt, which holds a $58.4 million position; 11.8% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions contain Eduardo Abush’s Waterfront Capital Partners, Noam Gottesman’s GLG Partners and Amit Nitin Doshi’s Harbor Spring Capital.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Hudson Bay Capital Management, managed by Sander Gerber, assembled the most outsized position in QTS Realty Trust Inc (NYSE:QTS). Hudson Bay Capital Management had $22.1 million invested in the company at the end of the quarter. Andrew Weiss’s Weiss Asset Management also made a $16.9 million investment in the stock during the quarter. The other funds with brand new QTS positions are Howard Marks’s Oaktree Capital Management, Stuart J. Zimmer’s Zimmer Partners, and J. Alan Reid, Jr.’s Forward Management.
Let’s check out hedge fund activity in other stocks similar to QTS Realty Trust Inc (NYSE:QTS). These stocks are Universal Forest Products, Inc. (NASDAQ:UFPI), Ameris Bancorp (NASDAQ:ABCB), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and Tenneco Inc (NYSE:TEN). This group of stocks’ market values are closest to QTS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UFPI | 18 | 79274 | 1 |
| ABCB | 13 | 192698 | 3 |
| CCO | 13 | 80607 | 1 |
| TEN | 22 | 123481 | -2 |
| Average | 16.5 | 119015 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $394 million in QTS’s case. Tenneco Inc (NYSE:TEN) is the most popular stock in this table. On the other hand Ameris Bancorp (NASDAQ:ABCB) is the least popular one with only 13 bullish hedge fund positions. QTS Realty Trust Inc (NYSE:QTS) 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. In this regard TEN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
