Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in QTS Realty Trust Inc (NYSE:QTS)? The smart money sentiment can provide an answer to this question.
Is QTS Realty Trust Inc (NYSE:QTS) a safe investment now? Money managers are betting on the stock. The number of bullish hedge fund bets moved up by 6 recently. Our calculations also showed that QTS isn’t among the 30 most popular stocks among hedge funds. QTS was in 22 hedge funds’ portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with QTS holdings at the end of the previous quarter.
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’ 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Sander Gerber of Hudson Bay Capital
We’re going to take a glance at the latest hedge fund action regarding QTS Realty Trust Inc (NYSE:QTS).
What have hedge funds been doing with QTS Realty Trust Inc (NYSE:QTS)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the fourth quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in QTS a year ago. 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 QTS Realty Trust Inc (NYSE:QTS), which was worth $114.1 million at the end of the first quarter. On the second spot was Land & Buildings Investment Management which amassed $43.8 million worth of shares. Moreover, Citadel Investment Group, Waterfront Capital Partners, and Balyasny Asset Management were also bullish on QTS Realty Trust Inc (NYSE:QTS), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, assembled the largest position in QTS Realty Trust Inc (NYSE:QTS). Driehaus Capital had $3.2 million invested in the company at the end of the quarter. David Rodriguez-Fraile’s BlueMar Capital Management also initiated a $2.6 million position during the quarter. The following funds were also among the new QTS investors: Alec Litowitz and Ross Laser’s Magnetar Capital, Sander Gerber’s Hudson Bay Capital Management, and Jeffrey Hinkle’s Shoals Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as QTS Realty Trust Inc (NYSE:QTS) but similarly valued. We will take a look at Advanced Disposal Services, Inc. (NYSE:ADSW), Seritage Growth Properties (NYSE:SRG), Yamana Gold Inc. (NYSE:AUY), and Cabot Corporation (NYSE:CBT). This group of stocks’ market caps are closest to QTS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADSW | 12 | 123110 | -3 |
| SRG | 17 | 451405 | 3 |
| AUY | 18 | 167074 | -1 |
| CBT | 20 | 107789 | -9 |
| Average | 16.75 | 212345 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $372 million in QTS’s case. Cabot Corporation (NYSE:CBT) is the most popular stock in this table. On the other hand Advanced Disposal Services, Inc. (NYSE:ADSW) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks QTS Realty Trust Inc (NYSE:QTS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on QTS as the stock returned 2.6% during the same period 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.
Disclosure: None. This article was originally published at Insider Monkey.
