We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Mack Cali Realty Corp (NYSE:CLI) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Mack Cali Realty Corp (NYSE:CLI) investors should pay attention to an increase in hedge fund sentiment lately. CLI was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 13 hedge funds in our database with CLI holdings at the end of the previous quarter. Our calculations also showed that CLI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the key hedge fund action surrounding Mack Cali Realty Corp (NYSE:CLI).
How have hedgies been trading Mack Cali Realty Corp (NYSE:CLI)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in CLI a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Mack Cali Realty Corp (NYSE:CLI) was held by Renaissance Technologies, which reported holding $100.3 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $13.1 million position. Other investors bullish on the company included Fisher Asset Management, Winton Capital Management, and Weld Capital Management. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Mack Cali Realty Corp (NYSE:CLI), around 1.8% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to CLI.
With a general bullishness amongst the heavyweights, key money managers have jumped into Mack Cali Realty Corp (NYSE:CLI) headfirst. Winton Capital Management, managed by David Harding, initiated the most outsized position in Mack Cali Realty Corp (NYSE:CLI). Winton Capital Management had $3 million invested in the company at the end of the quarter. Andrew Kurita’s Kettle Hill Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with brand new CLI positions are Donald Sussman’s Paloma Partners, Parvinder Thiara’s Athanor Capital, and D. E. Shaw’s D E Shaw.
Let’s go over hedge fund activity in other stocks similar to Mack Cali Realty Corp (NYSE:CLI). We will take a look at AlarmCom Holdings Inc (NASDAQ:ALRM), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Cal-Maine Foods Inc (NASDAQ:CALM), and SPX FLOW, Inc. (NASDAQ:FLOW). All of these stocks’ market caps are similar to CLI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALRM | 28 | 260363 | 7 |
| IRWD | 28 | 416880 | 3 |
| CALM | 15 | 172532 | -6 |
| FLOW | 16 | 212749 | 4 |
| Average | 21.75 | 265631 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $134 million in CLI’s case. AlarmCom Holdings Inc (NASDAQ:ALRM) is the most popular stock in this table. On the other hand Cal-Maine Foods Inc (NASDAQ:CALM) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Mack Cali Realty Corp (NYSE:CLI) is even less popular than CALM. Hedge funds dodged a bullet by taking a bearish stance towards CLI. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately CLI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CLI investors were disappointed as the stock returned -34.8% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
