Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Seritage Growth Properties (NYSE:SRG)? The smart money sentiment can provide an answer to this question.
Is Seritage Growth Properties (NYSE:SRG) a safe investment now? The smart money is betting on the stock. The number of bullish hedge fund positions increased by 3 recently. Our calculations also showed that SRG isn’t among the 30 most popular stocks among hedge funds. SRG was in 17 hedge funds’ portfolios at the end of the first quarter of 2019. There were 14 hedge funds in our database with SRG holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s analyze the key hedge fund action surrounding Seritage Growth Properties (NYSE:SRG).
What does smart money think about Seritage Growth Properties (NYSE:SRG)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SRG over the last 15 quarters. 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, BloombergSen was the largest shareholder of Seritage Growth Properties (NYSE:SRG), with a stake worth $124.4 million reported as of the end of March. Trailing BloombergSen was Empyrean Capital Partners, which amassed a stake valued at $98.6 million. EMS Capital, Gates Capital Management, and Wallace Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, some big names were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Seritage Growth Properties (NYSE:SRG). Point72 Asset Management had $0.3 million invested in the company at the end of the quarter. Jay Petschek and Steven Major’s Corsair Capital Management also made a $0.3 million investment in the stock during the quarter. The following funds were also among the new SRG investors: John A. Levin’s Levin Capital Strategies and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to Seritage Growth Properties (NYSE:SRG). We will take a look at Yamana Gold Inc. (NYSE:AUY), Cabot Corporation (NYSE:CBT), HB Fuller Co (NYSE:FUL), and Cimpress NV (NASDAQ:CMPR). This group of stocks’ market values match SRG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AUY | 18 | 167074 | -1 |
| CBT | 20 | 107789 | -9 |
| FUL | 18 | 190088 | 4 |
| CMPR | 11 | 428204 | -7 |
| Average | 16.75 | 223289 | -3.25 |
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 $223 million. That figure was $451 million in SRG’s case. Cabot Corporation (NYSE:CBT) is the most popular stock in this table. On the other hand Cimpress NV (NASDAQ:CMPR) is the least popular one with only 11 bullish hedge fund positions. Seritage Growth Properties (NYSE:SRG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SRG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SRG were disappointed as the stock returned -2.3% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
