Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Equity Residential (NYSE:EQR) to find out whether it was one of their high conviction long-term ideas.
Equity Residential (NYSE:EQR) was in 24 hedge funds’ portfolios at the end of September. EQR has experienced a decrease in activity from the world’s largest hedge funds recently. There were 28 hedge funds in our database with EQR positions at the end of the previous quarter. 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 Yahoo! Inc. (NASDAQ:YHOO), Johnson Controls, Inc. (NYSE:JCI), and DISH Network Corp. (NASDAQ:DISH) to gather more data points.
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To most investors, hedge funds are assumed to be slow, outdated financial vehicles of years past. While there are greater than 8000 funds trading today, We look at the elite of this group, around 700 funds. It is estimated that this group of investors handle bulk of the hedge fund industry’s total capital, and by paying attention to their first-class investments, Insider Monkey has brought to light numerous investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, let’s view the key action regarding Equity Residential (NYSE:EQR).
How have hedgies been trading Equity Residential (NYSE:EQR)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the second quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AEW Capital Management has the biggest position in Equity Residential (NYSE:EQR), worth close to $294 million, comprising 6.9% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds an $90.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’ AQR Capital Management.
Judging by the fact that Equity Residential (NYSE:EQR) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that elected to cut their entire stakes heading into Q4. Intriguingly, Ken Heebner’s Capital Growth Management dropped the biggest investment of all the hedgies monitored by Insider Monkey, worth an estimated $34.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $13 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Equity Residential (NYSE:EQR) but similarly valued. These stocks are Yahoo! Inc. (NASDAQ:YHOO), Johnson Controls, Inc. (NYSE:JCI), DISH Network Corp. (NASDAQ:DISH), and Banco Bradesco SA (ADR) (NYSE:BBD). All of these stocks’ market caps match EQR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YHOO | 89 | 5470192 | -15 |
| JCI | 32 | 478236 | -9 |
| DISH | 53 | 3089941 | -15 |
| BBD | 11 | 146176 | -4 |
As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $2296 million. That figure was $684 million in EQR’s case. Yahoo! Inc. (NASDAQ:YHOO) is the most popular stock in this table. On the other hand Banco Bradesco SA (ADR) (NYSE:BBD) is the least popular one with only 11 bullish hedge fund positions. Equity Residential (NYSE:EQR) 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 YHOO might be a better candidate to consider a long position.
