Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. 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. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index ETFs returned approximately 27.5% through the end of November (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. 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 Mid-America Apartment Communities, Inc. (NYSE:MAA).
Is Mid-America Apartment Communities, Inc. (NYSE:MAA) going to take off soon? The smart money is turning bullish. The number of bullish hedge fund bets moved up by 4 lately. Our calculations also showed that MAA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MAA was in 17 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with MAA positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are viewed as underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, Our experts look at the upper echelon of this group, approximately 750 funds. It is estimated that this group of investors control bulk of the hedge fund industry’s total asset base, and by paying attention to their best investments, Insider Monkey has deciphered many investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ric Dillon of Diamond Hill Capital
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. We’re going to review the new hedge fund action encompassing Mid-America Apartment Communities, Inc. (NYSE:MAA).
What does smart money think about Mid-America Apartment Communities, Inc. (NYSE:MAA)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MAA over the last 17 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in Mid-America Apartment Communities, Inc. (NYSE:MAA). Renaissance Technologies has a $89.3 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Ric Dillon of Diamond Hill Capital, with a $56.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Israel Englander’s Millennium Management, Ken Fisher’s Fisher Asset Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to Mid-America Apartment Communities, Inc. (NYSE:MAA), around 0.3% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to MAA.
Now, some big names have jumped into Mid-America Apartment Communities, Inc. (NYSE:MAA) headfirst. Element Capital Management, managed by Jeffrey Talpins, initiated the most valuable position in Mid-America Apartment Communities, Inc. (NYSE:MAA). Element Capital Management had $1.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw, Matthew Tewksbury’s Stevens Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now review hedge fund activity in other stocks similar to Mid-America Apartment Communities, Inc. (NYSE:MAA). These stocks are Huntington Bancshares Incorporated (NASDAQ:HBAN), Ulta Beauty, Inc. (NASDAQ:ULTA), The Cooper Companies, Inc. (NYSE:COO), and Diamondback Energy Inc (NASDAQ:FANG). This group of stocks’ market values are similar to MAA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBAN | 20 | 96244 | -3 |
| ULTA | 39 | 900250 | -5 |
| COO | 27 | 741670 | -1 |
| FANG | 40 | 1201319 | -7 |
| Average | 31.5 | 734871 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $735 million. That figure was $299 million in MAA’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand Huntington Bancshares Incorporated (NASDAQ:HBAN) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Mid-America Apartment Communities, Inc. (NYSE:MAA) is even less popular than HBAN. Hedge funds dodged a bullet by taking a bearish stance towards MAA. 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 MAA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MAA investors were disappointed as the stock returned 5.5% 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.
