Is SL Green Realty Corp (SLG) A Good Stock To Buy?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like SL Green Realty Corp (NYSE:SLG).

SL Green Realty Corp (NYSE:SLG) has experienced a decrease in enthusiasm from smart money lately. SLG was in 12 hedge funds’ portfolios at the end of the third quarter of 2015. There were 20 hedge funds in our database with SLG holdings at the end of the previous quarter. At the end of this article we will also compare SLG to other stocks, including CBRE Group Inc (NYSE:CBG), Newell Rubbermaid Inc. (NYSE:NWL), and Fastenal Company (NASDAQ:FAST) to get a better sense of its popularity.

At the moment there are a large number of methods stock market investors can use to assess their stock investments. A duo of the less utilized methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outperform the broader indices by a solid amount (see the details here).

Keeping this in mind, let’s check out the key action surrounding SL Green Realty Corp (NYSE:SLG).

What does the smart money think about SL Green Realty Corp (NYSE:SLG)?

Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 40% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, John Khoury’s Long Pond Capital has the number one position in SL Green Realty Corp (NYSE:SLG), worth close to $62.5 million, comprising 2.7% of its total 13F portfolio. The second most bullish fund manager is Adage Capital Management, run by Phill Gross and Robert Atchinson, which holds a $16.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Cliff Asness’s AQR Capital Management, and Ken Griffin’s Citadel Investment Group.

Since SL Green Realty Corp (NYSE:SLG) has experienced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few funds who were dropping their entire stakes heading into Q4. Intriguingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $2.7 million in stock. Peter Muller’s fund, PDT Partners, also dumped its holding, about $2.7 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest was cut by 8 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to SL Green Realty Corp (NYSE:SLG). These stocks are CBRE Group Inc (NYSE:CBG), Newell Rubbermaid Inc. (NYSE:NWL), Fastenal Company (NASDAQ:FAST), and Plains GP Holdings LP (NYSE:PAGP). This group of stocks’ market caps match SLG’s market cap.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $798 million. That figure was $100 million in SLG’s case. CBRE Group Inc (NYSE:CBG) is the most popular stock in this table, whereas Fastenal Company (NASDAQ:FAST) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks SL Green Realty Corp (NYSE:SLG) is even less popular than FAST. 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 be very familiar with the bullish thesis. In either case more research is warranted.