A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of SITE Centers Corp. (NYSE:SITC) during the quarter.
Is SITE Centers Corp. (NYSE:SITC) undervalued? The best stock pickers are becoming hopeful. The number of bullish hedge fund positions went up by 3 recently. Our calculations also showed that SITC isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the latest hedge fund action surrounding SITE Centers Corp. (NYSE:SITC).
How are hedge funds trading SITE Centers Corp. (NYSE:SITC)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SITC over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Capital Growth Management, managed by Ken Heebner, holds the largest position in SITE Centers Corp. (NYSE:SITC). Capital Growth Management has a $36.4 million position in the stock, comprising 2.3% of its 13F portfolio. On Capital Growth Management’s heels is Millennium Management, managed by Israel Englander, which holds a $25 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Dmitry Balyasny’s Balyasny Asset Management, Ken Griffin’s Citadel Investment Group and Paul Tudor Jones’s Tudor Investment Corp.
Consequently, key hedge funds were leading the bulls’ herd. Capital Growth Management, managed by Ken Heebner, established the biggest position in SITE Centers Corp. (NYSE:SITC). Capital Growth Management had $36.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $25 million position during the quarter. The other funds with brand new SITC positions are Dmitry Balyasny’s Balyasny Asset Management, Ken Griffin’s Citadel Investment Group, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SITE Centers Corp. (NYSE:SITC) but similarly valued. We will take a look at El Paso Electric Company (NYSE:EE), Agree Realty Corporation (NYSE:ADC), Descartes Systems Group (NASDAQ:DSGX), and Xencor Inc (NASDAQ:XNCR). All of these stocks’ market caps match SITC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EE | 23 | 274242 | 8 |
| ADC | 11 | 52478 | -3 |
| DSGX | 12 | 66040 | 3 |
| XNCR | 13 | 211098 | -2 |
| Average | 14.75 | 150965 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $92 million in SITC’s case. El Paso Electric Company (NYSE:EE) is the most popular stock in this table. On the other hand Agree Realty Corporation (NYSE:ADC) is the least popular one with only 11 bullish hedge fund positions. SITE Centers Corp. (NYSE:SITC) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SITC wasn’t nearly as popular as these 15 stock and hedge funds that were betting on SITC were disappointed as the stock returned 16.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.