Here’s What Smart Money Thinks of Spirit Realty Capital, Inc (New) (SRC)

Hedge funds are not perfect. They have their bad picks just like everyone else. Valeant, a stock hedge funds have loved, lost 79% during the last 12 months ending in November 21. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 mid-cap stocks among the best performing hedge funds yielded an average return of 18% in the same time period, vs. a gain of 7.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the successful funds think of Spirit Realty Capital, Inc (New) (NYSE:SRC) .

Spirit Realty Capital, Inc (New) (NYSE:SRC) investors should pay attention to a decrease in hedge fund sentiment lately. Overall, the number of funds followed by Insider Monkey bullish on SRC declined by three to 17 during the third quarter. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Companhia de Saneamento Basico (ADR) (NYSE:SBS), Trimble Navigation Limited (NASDAQ:TRMB), and Kilroy Realty Corp (NYSE:KRC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s take a gander at the key action surrounding Spirit Realty Capital, Inc (New) (NYSE:SRC).

What have hedge funds been doing with Spirit Realty Capital, Inc (New) (NYSE:SRC)?

During the third quarter, the number of investors from the Insider Monkey database long Spirit Realty Capital, Inc (New) (NYSE:SRC) fell by 15% to 17.  On the other hand, there were a total of 24 hedge funds with a bullish position in SRC at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the largest position in Spirit Realty Capital, Inc (New) (NYSE:SRC), worth close to $72.7 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Eric Edidin and Josh Lobel’s Archer Capital Management, with a $51.9 million position; the fund has 13% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Greg Poole’s Echo Street Capital Management, Jim Simons’ Renaissance Technologies, and James Dondero’s Highland Capital Management. We should note that Archer Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that Spirit Realty Capital, Inc (New) (NYSE:SRC) has gone through falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that John Khoury’s Long Pond Capital cut the largest investment of the 700 funds followed by Insider Monkey, totaling an estimated $13 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also dumped its stock worthy about $9.6 million.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Spirit Realty Capital, Inc (New) (NYSE:SRC) but similarly valued. We will take a look at Companhia de Saneamento Basico (ADR) (NYSE:SBS), Trimble Navigation Limited (NASDAQ:TRMB), Kilroy Realty Corp (NYSE:KRC), and iShares MSCI ACWI Index Fund (NASDAQ:ACWI). All of these stocks’ market caps match SRC’s market cap.

As you can see these stocks had an average of 14 investors from our database with bullish positions and the average amount invested in these stocks was $280 million. That figure was $340 million in SRC’s case. Trimble Navigation Limited (NASDAQ:TRMB) is the most popular stock in this table. On the other hand iShares MSCI ACWI Index Fund (NASDAQ:ACWI) is the least popular one with only nine investors holding long positions. Spirit Realty Capital, Inc (New) (NYSE:SRC) 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 Trimble Navigation Limited (NASDAQ:TRMB) might be a better candidate to consider taking a long position in.

Disclosure: none