Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Corporate Office Properties Trust (NYSE:OFC).
Is Corporate Office Properties Trust (NYSE:OFC) a buy here? The smart money is getting more bullish. The number of long hedge fund bets improved by 4 lately. Our calculations also showed that OFC isn’t among the 30 most popular stocks among hedge funds (view the video below). OFC was in 16 hedge funds’ portfolios at the end of the second quarter of 2019. There were 12 hedge funds in our database with OFC positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the fresh hedge fund action regarding Corporate Office Properties Trust (NYSE:OFC).
What have hedge funds been doing with Corporate Office Properties Trust (NYSE:OFC)?
At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in OFC a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Corporate Office Properties Trust (NYSE:OFC) was held by Renaissance Technologies, which reported holding $50.1 million worth of stock at the end of March. It was followed by AEW Capital Management with a $45.5 million position. Other investors bullish on the company included Winton Capital Management, Citadel Investment Group, and Fisher Asset Management.
As industrywide interest jumped, some big names were leading the bulls’ herd. Gillson Capital, managed by Daniel Johnson, created the most outsized position in Corporate Office Properties Trust (NYSE:OFC). Gillson Capital had $5.7 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $1.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Israel Englander’s Millennium Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Corporate Office Properties Trust (NYSE:OFC) but similarly valued. These stocks are Texas Capital Bancshares Inc (NASDAQ:TCBI), FireEye Inc (NASDAQ:FEYE), Exponent, Inc. (NASDAQ:EXPO), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). This group of stocks’ market valuations are closest to OFC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCBI | 19 | 237820 | 0 |
| FEYE | 29 | 345965 | 2 |
| EXPO | 15 | 108248 | -3 |
| ARNA | 29 | 346300 | 7 |
| Average | 23 | 259583 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $260 million. That figure was $183 million in OFC’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 15 bullish hedge fund positions. Corporate Office Properties Trust (NYSE:OFC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on OFC as the stock returned 14% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
