Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Seritage Growth Properties (NYSE:SRG) to find out whether it was one of their high conviction long-term ideas.
Is Seritage Growth Properties (NYSE:SRG) ready to rally soon? The smart money is in a pessimistic mood. The number of long hedge fund bets went down by 2 recently. Our calculations also showed that SRG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are viewed as worthless, old investment tools of the past. While there are over 8000 funds in operation at present, We hone in on the masters of this group, around 750 funds. Most estimates calculate that this group of people manage the majority of the hedge fund industry’s total asset base, and by watching their inimitable stock picks, Insider Monkey has revealed several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per 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 .
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. Let’s check out the latest hedge fund action regarding Seritage Growth Properties (NYSE:SRG).
What does smart money think about Seritage Growth Properties (NYSE:SRG)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in SRG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Jonathan Bloomberg’s BloombergSen has the biggest position in Seritage Growth Properties (NYSE:SRG), worth close to $122.2 million, amounting to 7.3% of its total 13F portfolio. The second largest stake is held by Empyrean Capital Partners, led by Michael A. Price and Amos Meron, holding a $106.2 million position; the fund has 5.5% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Jeffrey Gates’s Gates Capital Management, Edmond M. Safra’s EMS Capital and Scott Wallace’s Wallace Capital Management. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to Seritage Growth Properties (NYSE:SRG), around 8.59% of its 13F portfolio. BloombergSen is also relatively very bullish on the stock, earmarking 7.29 percent of its 13F equity portfolio to SRG.
Because Seritage Growth Properties (NYSE:SRG) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth about $0.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Seritage Growth Properties (NYSE:SRG) but similarly valued. We will take a look at Belden Inc. (NYSE:BDC), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Simmons First National Corporation (NASDAQ:SFNC), and Lexington Realty Trust (NYSE:LXP). This group of stocks’ market valuations resemble SRG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BDC | 13 | 77112 | -2 |
| RETA | 20 | 212229 | 5 |
| SFNC | 10 | 31824 | -2 |
| LXP | 13 | 108269 | 1 |
| Average | 14 | 107359 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $433 million in SRG’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only 10 bullish hedge fund positions. Seritage Growth Properties (NYSE:SRG) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SRG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SRG investors were disappointed as the stock returned -0.5% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
