The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Public Storage (NYSE:PSA) and determine whether the smart money was really smart about this stock.
Public Storage (NYSE:PSA) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. PSA has seen a decrease in hedge fund interest recently. There were 27 hedge funds in our database with PSA positions at the end of the first quarter. Our calculations also showed that PSA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Heebner of Capital Growth Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Public Storage (NYSE:PSA).
How are hedge funds trading Public Storage (NYSE:PSA)?
At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in PSA over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Public Storage (NYSE:PSA), with a stake worth $232.8 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $164.3 million. Diamond Hill Capital, Citadel Investment Group, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Public Storage (NYSE:PSA), around 6.91% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, earmarking 4.41 percent of its 13F equity portfolio to PSA.
Seeing as Public Storage (NYSE:PSA) has experienced falling interest from the smart money, logic holds that there lies a certain “tier” of money managers that slashed their entire stakes by the end of the second quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $24.3 million in stock, and Ken Heebner’s Capital Growth Management was right behind this move, as the fund dumped about $17.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Public Storage (NYSE:PSA). These stocks are SBA Communications Corporation (NASDAQ:SBAC), Metlife Inc (NYSE:MET), Xcel Energy Inc (NYSE:XEL), HCA Healthcare Inc (NYSE:HCA), NXP Semiconductors NV (NASDAQ:NXPI), DocuSign, Inc. (NASDAQ:DOCU), and Splunk Inc (NASDAQ:SPLK). This group of stocks’ market valuations are similar to PSA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBAC | 57 | 2165651 | 11 |
| MET | 31 | 970822 | -3 |
| XEL | 23 | 273421 | -1 |
| HCA | 71 | 2240096 | -16 |
| NXPI | 67 | 2214977 | 15 |
| DOCU | 57 | 2585727 | 10 |
| SPLK | 49 | 874330 | 12 |
| Average | 50.7 | 1617861 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.7 hedge funds with bullish positions and the average amount invested in these stocks was $1618 million. That figure was $713 million in PSA’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Xcel Energy Inc (NYSE:XEL) is the least popular one with only 23 bullish hedge fund positions. Public Storage (NYSE:PSA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PSA is 36. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on PSA as the stock returned 14.9% since the end of June (through September 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
