It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Industrial Logistics Properties Trust (NASDAQ:ILPT).
Industrial Logistics Properties Trust (NASDAQ:ILPT) was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. ILPT shareholders have witnessed an increase in hedge fund sentiment recently. There were 9 hedge funds in our database with ILPT positions at the end of the previous quarter. Our calculations also showed that ILPT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the recent hedge fund action encompassing Industrial Logistics Properties Trust (NASDAQ:ILPT).
What have hedge funds been doing with Industrial Logistics Properties Trust (NASDAQ:ILPT)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in ILPT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Industrial Logistics Properties Trust (NASDAQ:ILPT) was held by Indaba Capital Management, which reported holding $39.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $25.4 million position. Other investors bullish on the company included Renaissance Technologies, Balyasny Asset Management, and Algert Coldiron Investors. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Industrial Logistics Properties Trust (NASDAQ:ILPT), around 9.33% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 1.07 percent of its 13F equity portfolio to ILPT.
As aggregate interest increased, specific money managers have jumped into Industrial Logistics Properties Trust (NASDAQ:ILPT) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Industrial Logistics Properties Trust (NASDAQ:ILPT). Balyasny Asset Management had $3.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new ILPT investors: David E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks similar to Industrial Logistics Properties Trust (NASDAQ:ILPT). These stocks are BioTelemetry, Inc. (NASDAQ:BEAT), NIC Inc. (NASDAQ:EGOV), Arcos Dorados Holdings Inc (NYSE:ARCO), and Universal Corporation (NYSE:UVV). This group of stocks’ market caps are closest to ILPT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BEAT | 16 | 39830 | 0 |
| EGOV | 20 | 113155 | 3 |
| ARCO | 14 | 118648 | 0 |
| UVV | 15 | 110979 | -3 |
| Average | 16.25 | 95653 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $83 million in ILPT’s case. NIC Inc. (NASDAQ:EGOV) is the most popular stock in this table. On the other hand Arcos Dorados Holdings Inc (NYSE:ARCO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Industrial Logistics Properties Trust (NASDAQ:ILPT) is even less popular than ARCO. Hedge funds dodged a bullet by taking a bearish stance towards ILPT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ILPT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ILPT investors were disappointed as the stock returned 3.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
