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. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of National Storage Affiliates Trust (NYSE:NSA) based on that data.
National Storage Affiliates Trust (NYSE:NSA) was in 11 hedge funds’ portfolios at the end of the fourth quarter of 2019. NSA investors should pay attention to a decrease in hedge fund sentiment of late. There were 17 hedge funds in our database with NSA positions at the end of the previous quarter. Our calculations also showed that NSA 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).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
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. With all of this in mind let’s view the new hedge fund action encompassing National Storage Affiliates Trust (NYSE:NSA).
Hedge fund activity in National Storage Affiliates Trust (NYSE:NSA)
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from the third quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in NSA a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in National Storage Affiliates Trust (NYSE:NSA) was held by Renaissance Technologies, which reported holding $59.5 million worth of stock at the end of September. It was followed by Winton Capital Management with a $11.1 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and D E Shaw. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to National Storage Affiliates Trust (NYSE:NSA), around 0.19% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to NSA.
Since National Storage Affiliates Trust (NYSE:NSA) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds who were dropping their positions entirely heading into Q4. Interestingly, Ken Griffin’s Citadel Investment Group dumped the largest investment of all the hedgies watched by Insider Monkey, worth about $8.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $2.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as National Storage Affiliates Trust (NYSE:NSA) but similarly valued. We will take a look at Callaway Golf Company (NYSE:ELY), Walker & Dunlop Inc. (NYSE:WD), Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB), and Cardtronics plc (NASDAQ:CATM). This group of stocks’ market values match NSA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ELY | 20 | 269683 | 0 |
| WD | 25 | 101505 | 9 |
| NTB | 17 | 149206 | 2 |
| CATM | 22 | 554249 | 1 |
| Average | 21 | 268661 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $83 million in NSA’s case. Walker & Dunlop Inc. (NYSE:WD) is the most popular stock in this table. On the other hand Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks National Storage Affiliates Trust (NYSE:NSA) is even less popular than NTB. Hedge funds clearly dropped the ball on NSA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds 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 still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on NSA as the stock returned -8.6% during the same time period and outperformed the market by an even larger margin.
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.
