Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Lexington Realty Trust (NYSE:LXP) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of the third quarter of 2018. 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 Oil States International, Inc. (NYSE:OIS), 8×8, Inc. (NASDAQ:EGHT), and AAON, Inc. (NASDAQ:AAON) to gather more data points.
In the 21st century investor’s toolkit there are a lot of tools market participants use to size up publicly traded companies. A pair of the most underrated tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the broader indices by a very impressive amount (see the details here).
We’re going to take a look at the key hedge fund action regarding Lexington Realty Trust (NYSE:LXP).
How have hedgies been trading Lexington Realty Trust (NYSE:LXP)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the second quarter of 2018. On the other hand, there were a total of 12 hedge funds with a bullish position in LXP at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Forward Management held the most valuable stake in Lexington Realty Trust (NYSE:LXP), which was worth $15.7 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $10.9 million worth of shares. Moreover, Citadel Investment Group, Forward Management, and Marshall Wace LLP were also bullish on Lexington Realty Trust (NYSE:LXP), allocating a large percentage of their portfolios to this stock.
Seeing as Lexington Realty Trust (NYSE:LXP) has faced a decline in interest from the smart money, we can see that there is a sect of fund managers that elected to cut their full holdings last quarter. At the top of the heap, Jim Simons’s Renaissance Technologies cut the biggest stake of the 700 funds followed by Insider Monkey, comprising an estimated $0.6 million in stock, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors was right behind this move, as the fund cut about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Lexington Realty Trust (NYSE:LXP) but similarly valued. These stocks are Oil States International, Inc. (NYSE:OIS), 8×8, Inc. (NYSE:EGHT), AAON, Inc. (NASDAQ:AAON), and Extraction Oil & Gas, Inc. (NASDAQ:XOG). This group of stocks’ market valuations match LXP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OIS | 11 | 37638 | 2 |
| EGHT | 18 | 155881 | 0 |
| AAON | 5 | 7080 | 0 |
| XOG | 20 | 289200 | -1 |
| Average | 13.5 | 122450 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $49 million in LXP’s case. Extraction Oil & Gas, Inc. (NASDAQ:XOG) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 5 bullish hedge fund positions. Lexington Realty Trust (NYSE:LXP) 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. In this regard XOG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
