How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Alexandria Real Estate Equities Inc (NYSE:ARE).
Hedge fund interest in Alexandria Real Estate Equities Inc (NYSE:ARE) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ARE to other stocks including The Goodyear Tire & Rubber Company (NASDAQ:GT), The AES Corporation (NYSE:AES), and Pinnacle West Capital Corporation (NYSE:PNW) to get a better sense of its popularity.
Follow Alexandria Real Estate Equities Inc. (NYSE:ARE)
Follow Alexandria Real Estate Equities Inc. (NYSE:ARE)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Now, let’s take a look at the recent action encompassing Alexandria Real Estate Equities Inc (NYSE:ARE).
How are hedge funds trading Alexandria Real Estate Equities Inc (NYSE:ARE)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 12 hedge funds with a bullish position in ARE at the beginning of this year. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, led by Ken Griffin, holds the most valuable position in Alexandria Real Estate Equities Inc (NYSE:ARE). According to regulatory filings, the fund has a $30.9 million position in the stock, comprising less than 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, with a $5.5 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise J. Alan Reid, Jr.’s Forward Management, Cliff Asness’ AQR Capital Management and Richard Driehaus’s Driehaus Capital. We should note that Forward 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.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that got rid of their entire stakes in the stock during the third quarter. Intriguingly, James Dondero’s Highland Capital Management got rid of the biggest position of all the investors studied by Insider Monkey, valued at an estimated $8.4 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also dumped its stock, about $0.6 million worth of Alexandria Real Estate Equities Inc (NYSE:ARE) shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alexandria Real Estate Equities Inc (NYSE:ARE) but similarly valued. These stocks are The Goodyear Tire & Rubber Company (NASDAQ:GT), The AES Corporation (NYSE:AES), Pinnacle West Capital Corporation (NYSE:PNW), and Brookfield Infrastructure Partners L.P. (NYSE:BIP). This group of stocks’ market valuations resemble ARE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GT | 38 | 1712422 | 4 |
| AES | 22 | 107548 | 3 |
| PNW | 20 | 669390 | 1 |
| BIP | 6 | 39373 | -1 |
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $632 million. That figure was a minor $54 million in ARE’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 6 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. In this regard GT might be a better candidate to consider taking a long position in.
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Disclosure: none.
