Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Essex Property Trust Inc (NYSE:ESS) from the perspective of those elite funds.
Is Essex Property Trust Inc (NYSE:ESS) a buy right now? Money managers are betting on the stock. The number of long hedge fund positions advanced by 3 recently. Our calculations also showed that ESS isn’t among the 30 most popular stocks among hedge funds. ESS was in 19 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with ESS positions at the end of the previous quarter.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the key hedge fund action regarding Essex Property Trust Inc (NYSE:ESS).
How have hedgies been trading Essex Property Trust Inc (NYSE:ESS)?
Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in ESS a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Essex Property Trust Inc (NYSE:ESS), which was worth $191.7 million at the end of the third quarter. On the second spot was AEW Capital Management which amassed $150 million worth of shares. Moreover, Millennium Management, Adage Capital Management, and Citadel Investment Group were also bullish on Essex Property Trust Inc (NYSE:ESS), allocating a large percentage of their portfolios to this stock.
Now, key money managers were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, established the largest position in Essex Property Trust Inc (NYSE:ESS). LMR Partners had $0.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new ESS investors: Jeffrey Talpins’s Element Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Essex Property Trust Inc (NYSE:ESS) but similarly valued. We will take a look at Church & Dwight Co., Inc. (NYSE:CHD), Entergy Corporation (NYSE:ETR), Harris Corporation (NYSE:HRS), and Grifols SA (NASDAQ:GRFS). This group of stocks’ market valuations resemble ESS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHD | 30 | 222985 | 10 |
| ETR | 31 | 1503762 | 4 |
| HRS | 23 | 677895 | -4 |
| GRFS | 14 | 185775 | 2 |
| Average | 24.5 | 647604 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $648 million. That figure was $432 million in ESS’s case. Entergy Corporation (NYSE:ETR) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 14 bullish hedge fund positions. Essex Property Trust Inc (NYSE:ESS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on ESS, though not to the same extent, as the stock returned 18% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
