Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
In this article, we are going to take a closer look at the hedge fund sentiment towards Paramount Group Inc (NYSE:PGRE). Among the funds in our database, the company registered an increase in popularity last quarter and saw 14 funds holding shares at the end of September. 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 Medical Properties Trust, Inc. (NYSE:MPW), BBVA Banco Frances S.A. (ADR) (NYSE:BFR), and Gulfport Energy Corporation (NASDAQ:GPOR) to gather more data points.
Follow Paramount Group Inc. (NYSE:PGRE)
Follow Paramount Group Inc. (NYSE:PGRE)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to analyze the recent action encompassing Paramount Group Inc (NYSE:PGRE).
What have hedge funds been doing with Paramount Group Inc (NYSE:PGRE)?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, versus 11 funds a quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in PGRE at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Long Pond Capital, led by John Khoury, holds the number one position in Paramount Group Inc (NYSE:PGRE). Long Pond Capital has a $171.9 million position in the stock, comprising 8% of its 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, with a $21.6 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise David E. Shaw’s D E Shaw and Jeffrey Furber’s AEW Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, some big names were leading the bulls’ herd. Castle Ridge Investment Management, led by Michael Swotes, initiated the most valuable position in Paramount Group Inc (NYSE:PGRE). Castle Ridge Investment Management had $6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $4.6 million investment in the stock during the quarter. The only other fund with a brand new PGRE position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Paramount Group Inc (NYSE:PGRE) but similarly valued. These stocks are Medical Properties Trust, Inc. (NYSE:MPW), BBVA Banco Frances S.A. (ADR) (NYSE:BFR), Gulfport Energy Corporation (NASDAQ:GPOR), and Post Properties Inc (NYSE:PPS). This group of stocks’ market caps match PGRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MPW | 23 | 211104 | 11 |
| BFR | 11 | 52797 | 1 |
| GPOR | 34 | 816426 | -6 |
| PPS | 13 | 273165 | -6 |
As you can see these stocks had an average of 20 funds with bullish positions and the average amount invested in these stocks was $338 million. That figure was $244 million in PGRE’s case. Gulfport Energy Corporation (NASDAQ:GPOR) is the most popular stock in this table with 34 funds holding shares. On the other hand BBVA Banco Frances S.A. (ADR) (NYSE:BFR) is the least popular one with only 11 bullish hedge fund positions. Paramount Group Inc (NYSE:PGRE) 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 Gulfport Energy Corporation (NASDAQ:GPOR) might be a better candidate to consider taking a long position in.
Disclosure: none
