We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Alexandria Real Estate Equities Inc (NYSE:ARE).
Alexandria Real Estate Equities Inc (NYSE:ARE) was in 21 hedge funds’ portfolios at the end of September. ARE has experienced a decrease in hedge fund sentiment of late. There were 27 hedge funds in our database with ARE positions at the end of the previous quarter. Our calculations also showed that ARE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are dozens of gauges stock traders have at their disposal to size up publicly traded companies. A couple of the best gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best fund managers can trounce their index-focused peers by a significant margin (see the details here).
Ken Heebner of Capital Growth Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action encompassing Alexandria Real Estate Equities Inc (NYSE:ARE).
How are hedge funds trading Alexandria Real Estate Equities Inc (NYSE:ARE)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ARE over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Zimmer Partners held the most valuable stake in Alexandria Real Estate Equities Inc (NYSE:ARE), which was worth $129.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $38.9 million worth of shares. Capital Growth Management, Winton Capital Management, and Citadel Investment Group 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 Waterfront Capital Partners allocated the biggest weight to Alexandria Real Estate Equities Inc (NYSE:ARE), around 3.5% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, dishing out 2.54 percent of its 13F equity portfolio to ARE.
Judging by the fact that Alexandria Real Estate Equities Inc (NYSE:ARE) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of hedge funds who sold off their positions entirely in the third quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital said goodbye to the largest stake of all the hedgies followed by Insider Monkey, valued at close to $11.1 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund dropped about $3.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Alexandria Real Estate Equities Inc (NYSE:ARE). These stocks are STMicroelectronics N.V. (NYSE:STM), Mettler-Toledo International Inc. (NYSE:MTD), AmerisourceBergen Corporation (NYSE:ABC), and Franco-Nevada Corporation (NYSE:FNV). This group of stocks’ market caps match ARE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STM | 11 | 94533 | -2 |
| MTD | 22 | 326854 | 2 |
| ABC | 36 | 435220 | 0 |
| FNV | 22 | 750908 | 4 |
| Average | 22.75 | 401879 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $402 million. That figure was $343 million in ARE’s case. AmerisourceBergen Corporation (NYSE:ABC) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 11 bullish hedge fund positions. Alexandria Real Estate Equities Inc (NYSE:ARE) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ARE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ARE investors were disappointed as the stock returned 5.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
