Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Whitestone REIT (NYSE:WSR) investors should pay attention to a decrease in hedge fund sentiment lately. WSR was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. There were 8 hedge funds in our database with WSR holdings at the end of the previous quarter. 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 NanoString Technologies Inc (NASDAQ:NSTG), DICE HOLDINGS, INC. (NYSE:DHX), and Teekay Tankers Ltd. (NYSE:TNK) to gather more data points.
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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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Now, we’re going to check out the recent action regarding Whitestone REIT (NYSE:WSR).
What does the smart money think about Whitestone REIT (NYSE:WSR)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, down 13% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in WSR at the beginning of this year. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the biggest hedge funds in the world, has the biggest position in Whitestone REIT (NYSE:WSR), worth close to $6.5 million, corresponding to less than 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Cliff Asness of AQR Capital Management, with a $1.6 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other peers that hold long positions comprise John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management and Matthew Hulsizer’s PEAK6 Capital Management. 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.
Due to the fact that Whitestone REIT (NYSE:WSR) has experienced bearish sentiment from the smart money, logic holds that there exists a select few fund managers who sold off their positions entirely heading into Q4. It’s worth mentioning that Ken Griffin’s Citadel Investment Group cashed in the largest stake of the 700 funds studied by Insider Monkey, valued at an estimated $0.4 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also sold off its stock, about $5,000 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Whitestone REIT (NYSE:WSR) but similarly valued. We will take a look at NanoString Technologies Inc (NASDAQ:NSTG), DICE HOLDINGS, INC. (NYSE:DHX), Teekay Tankers Ltd. (NYSE:TNK), and Forestar Group Inc. (NYSE:FOR). This group of stocks’ market valuations resemble WSR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NSTG | 21 | 100355 | 9 |
| DHX | 17 | 28977 | 0 |
| TNK | 9 | 61883 | -5 |
| FOR | 15 | 109808 | 5 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $11 million in WSR’s case. NanoString Technologies Inc (NASDAQ:NSTG) is the most popular stock in this table. On the other hand Teekay Tankers Ltd. (NYSE:TNK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Whitestone REIT (NYSE:WSR) is even less popular than TNK. 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.
Disclosure: none.
