We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Piedmont Office Realty Trust, Inc. (NYSE:PDM).
Piedmont Office Realty Trust, Inc. (NYSE:PDM) has seen a decrease in support from the world’s most elite money managers recently. PDM was in 12 hedge funds’ portfolios at the end of June. There were 13 hedge funds in our database with PDM holdings at the end of the previous quarter. Our calculations also showed that PDM isn’t among the 30 most popular stocks among hedge funds (view the video below).
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the key hedge fund action encompassing Piedmont Office Realty Trust, Inc. (NYSE:PDM).
How are hedge funds trading Piedmont Office Realty Trust, Inc. (NYSE:PDM)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in PDM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Piedmont Office Realty Trust, Inc. (NYSE:PDM), with a stake worth $57.4 million reported as of the end of March. Trailing Renaissance Technologies was AEW Capital Management, which amassed a stake valued at $41.5 million. GLG Partners, Millennium Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Because Piedmont Office Realty Trust, Inc. (NYSE:PDM) has experienced declining sentiment from the smart money, logic holds that there exists a select few fund managers who were dropping their full holdings in the second quarter. Intriguingly, Paul Tudor Jones’s Tudor Investment Corp sold off the largest investment of the 750 funds followed by Insider Monkey, worth close to $0.9 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund cut about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Piedmont Office Realty Trust, Inc. (NYSE:PDM). These stocks are Red Rock Resorts, Inc. (NASDAQ:RRR), Argo Group International Holdings, Ltd. (NYSE:ARGO), QTS Realty Trust Inc (NYSE:QTS), and iRobot Corporation (NASDAQ:IRBT). This group of stocks’ market values are similar to PDM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRR | 16 | 317709 | -1 |
| ARGO | 19 | 218517 | 2 |
| QTS | 23 | 357128 | 1 |
| IRBT | 9 | 57604 | -6 |
| Average | 16.75 | 237740 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $124 million in PDM’s case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand iRobot Corporation (NASDAQ:IRBT) is the least popular one with only 9 bullish hedge fund positions. Piedmont Office Realty Trust, Inc. (NYSE:PDM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PDM as the stock returned 5.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
