Is ACRES Commercial Realty Corp. (ACR) A Good Stock To Buy?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ACRES Commercial Realty Corp. (NYSE:ACR).

Is ACR a good stock to buy? ACRES Commercial Realty Corp. (NYSE:ACR) has seen a decrease in hedge fund sentiment in recent months. ACRES Commercial Realty Corp. (NYSE:ACR) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic is 17. There were 9 hedge funds in our database with ACR holdings at the end of December. Our calculations also showed that ACR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to review the fresh hedge fund action surrounding ACRES Commercial Realty Corp. (NYSE:ACR).

Do Hedge Funds Think ACR Is A Good Stock To Buy Now?

At the end of March, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -44% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in ACR 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in ACRES Commercial Realty Corp. (NYSE:ACR), worth close to $11 million, accounting for 0.1% of its total 13F portfolio. Coming in second is D E Shaw, led by D. E. Shaw, holding a $2.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, and Frederick DiSanto’s Ancora Advisors. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to ACRES Commercial Realty Corp. (NYSE:ACR), around 0.07% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to ACR.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Royce & Associates).

Let’s check out hedge fund activity in other stocks similar to ACRES Commercial Realty Corp. (NYSE:ACR). These stocks are Grindrod Shipping Holdings Ltd. (NASDAQ:GRIN), Northern Technologies International Corp (NASDAQ:NTIC), Powerbridge Technologies Co., Ltd. (NASDAQ:PBTS), FIRST FINANCIAL NORTHWEST, INC. (NASDAQ:FFNW), Aytu Biopharma, Inc. (NASDAQ:AYTU), BioSig Technologies, Inc. (NASDAQ:BSGM), and Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK). This group of stocks’ market valuations are similar to ACR’s market valuation.

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As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $16 million in ACR’s case. Aytu Biopharma, Inc. (NASDAQ:AYTU) is the most popular stock in this table. On the other hand Grindrod Shipping Holdings Ltd. (NASDAQ:GRIN) is the least popular one with only 2 bullish hedge fund positions. ACRES Commercial Realty Corp. (NYSE:ACR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACR is 39.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on ACR as the stock returned 16.7% since the end of Q1 (through 6/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.