We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Apartment Investment and Management Co. (NYSE:AIV) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of September. 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 Post Holdings Inc (NYSE:POST), DXC Technology Company (NYSE:DXC), and Assurant, Inc. (NYSE:AIZ) to gather more data points. Our calculations also showed that AIV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Heebner of Capital Growth Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing Apartment Investment and Management Co. (NYSE:AIV).
What does smart money think about Apartment Investment and Management Co. (NYSE:AIV)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AIV over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the most valuable position in Apartment Investment and Management Co. (NYSE:AIV). Renaissance Technologies has a $292.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Dmitry Balyasny of Balyasny Asset Management, with a $69.8 million position; 0.5% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of David Harding’s Winton Capital Management, John Khoury’s Long Pond Capital and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Apartment Investment and Management Co. (NYSE:AIV), around 3.87% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, designating 1.43 percent of its 13F equity portfolio to AIV.
Due to the fact that Apartment Investment and Management Co. (NYSE:AIV) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of money managers who were dropping their positions entirely heading into Q4. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $26.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $6.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Apartment Investment and Management Co. (NYSE:AIV). We will take a look at Post Holdings Inc (NYSE:POST), DXC Technology Company (NYSE:DXC), Assurant, Inc. (NYSE:AIZ), and Graco Inc. (NYSE:GGG). This group of stocks’ market valuations are similar to AIV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| POST | 28 | 1466400 | 2 |
| DXC | 34 | 1144765 | -7 |
| AIZ | 27 | 905471 | -2 |
| GGG | 19 | 187451 | -5 |
| Average | 27 | 926022 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $926 million. That figure was $659 million in AIV’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Graco Inc. (NYSE:GGG) is the least popular one with only 19 bullish hedge fund positions. Apartment Investment and Management Co. (NYSE:AIV) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately AIV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AIV investors were disappointed as the stock returned 21.4% in 2019 and trailed 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 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
