At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Hedge fund interest in Piedmont Office Realty Trust, Inc. (NYSE:PDM) shares was flat at the end of last quarter. This is usually a negative indicator. 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 CLARCOR Inc. (NYSE:CLC), Harbinger Group Inc (NYSE:HRG), and Leidos Holdings Inc (NYSE:LDOS) to gather more data points.
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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How are hedge funds trading Piedmont Office Realty Trust, Inc. (NYSE:PDM)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016, after falling from 13 hedge funds with bullish positions in Q2. Below, you can check out the change in hedge fund sentiment towards PDM over the last 5 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jeffrey Furber of AEW Capital Management holds the most valuable position in Piedmont Office Realty Trust, Inc. (NYSE:PDM). AEW Capital Management has a $131.9 million position in the stock, comprising 2.7% of its 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $52.5 million position. Remaining members of the smart money that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’ AQR Capital Management, and Ken Griffin’s Citadel Investment Group. 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.
Because Piedmont Office Realty Trust, Inc. (NYSE:PDM) has experienced falling interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds that elected to cut their entire stakes in the third quarter. Interestingly, David E. Shaw’s D E Shaw sold off the biggest investment of the 700 funds studied by Insider Monkey, totaling an estimated $0.7 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dropped its call options, about $0.3 million worth.
Let’s now review hedge fund activity in other stocks similar to Piedmont Office Realty Trust, Inc. (NYSE:PDM). These stocks are CLARCOR Inc. (NYSE:CLC), Harbinger Group Inc (NYSE:HRG), Leidos Holdings Inc (NYSE:LDOS), and Education Realty Trust, Inc. (NYSE:EDR). All of these stocks’ market caps are closest to PDM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLC | 12 | 108660 | -2 |
| HRG | 27 | 1541968 | 2 |
| LDOS | 27 | 644414 | 1 |
| EDR | 11 | 140116 | -3 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $609 million. That figure was $211 million in PDM’s case. Harbinger Group Inc (NYSE:HRG) is the most popular stock in this table. On the other hand Education Realty Trust, Inc. (NYSE:EDR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Piedmont Office Realty Trust, Inc. (NYSE:PDM) is even less popular than EDR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not have uncovered the bullish thesis. In either case more research is warranted.
Disclosure: None
