Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Extra Space Storage, Inc. (NYSE:EXR).
Extra Space Storage, Inc. (NYSE:EXR) has experienced an increase in activity from the world’s largest hedge funds lately. 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 CGI Group Inc. (USA) (NYSE:GIB), Alliance Data Systems Corporation (NYSE:ADS), and Motorola Solutions Inc (NYSE:MSI) to gather more data points.
Follow Extra Space Storage Inc. (NYSE:EXR)
Follow Extra Space Storage Inc. (NYSE:EXR)
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Now, we’re going to review the recent action encompassing Extra Space Storage, Inc. (NYSE:EXR).
Hedge fund activity in Extra Space Storage, Inc. (NYSE:EXR)
Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the most valuable position in Extra Space Storage, Inc. (NYSE:EXR), worth close to $32.2 million, accounting for 0.1% of its total 13F portfolio. On Fisher Asset Management’s heels is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $14.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of Cliff Asness’s AQR Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the largest position in Extra Space Storage, Inc. (NYSE:EXR). Two Sigma Advisors had $7 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $6.2 million position during the quarter. The following funds were also among the new EXR investors: Glenn Russell Dubin’s Highbridge Capital Management, Greg Poole’s Echo Street Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Extra Space Storage, Inc. (NYSE:EXR) but similarly valued. These stocks are CGI Group Inc. (USA) (NYSE:GIB), Alliance Data Systems Corporation (NYSE:ADS), Motorola Solutions Inc (NYSE:MSI), and Quest Diagnostics Inc (NYSE:DGX). All of these stocks’ market caps resemble EXR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GIB | 16 | 121641 | 1 |
| ADS | 32 | 1479453 | -1 |
| MSI | 28 | 1170738 | -1 |
| DGX | 24 | 349248 | -1 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $97 million in EXR’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand CGI Group Inc. (USA) (NYSE:GIB) is the least popular one with only 16 bullish hedge fund positions. Extra Space Storage, Inc. (NYSE:EXR) 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 ADS might be a better candidate to consider a long position.
