Should I Avoid Ventas, Inc. (VTR)?

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 Ventas, Inc. (NYSE:VTR) and determine whether the smart money was really smart about this stock.

Is Ventas, Inc. (NYSE:VTR) an exceptional stock to buy now? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund bets were trimmed by 4 in recent months. Ventas, Inc. (NYSE:VTR) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. Our calculations also showed that VTR 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Seth Klarman of Baupost Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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 view the new hedge fund action encompassing Ventas, Inc. (NYSE:VTR).

How are hedge funds trading Ventas, Inc. (NYSE:VTR)?

At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VTR over the last 20 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ricky Sandler’s Eminence Capital has the largest position in Ventas, Inc. (NYSE:VTR), worth close to $43.6 million, accounting for 0.4% of its total 13F portfolio. The second largest stake is held by  Renaissance Technologies, with a $23.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Seth Klarman’s Baupost Group, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position 683 Capital Partners allocated the biggest weight to Ventas, Inc. (NYSE:VTR), around 0.73% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, dishing out 0.44 percent of its 13F equity portfolio to VTR.

Seeing as Ventas, Inc. (NYSE:VTR) has experienced declining sentiment from the smart money, we can see that there is a sect of funds who were dropping their entire stakes last quarter. Interestingly, Stephen DuBois’s Camber Capital Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $87.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $3.6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Ventas, Inc. (NYSE:VTR). We will take a look at Zebra Technologies Corporation (NASDAQ:ZBRA), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Nomura Holdings, Inc. (NYSE:NMR), Evergy, Inc. (NYSE:EVRG), Bio-Rad Laboratories, Inc. (NYSE:BIO), Vipshop Holdings Limited (NYSE:VIPS), and Altice USA, Inc. (NYSE:ATUS). This group of stocks’ market valuations are similar to VTR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $1057 million. That figure was $167 million in VTR’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Ventas, Inc. (NYSE:VTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VTR is 38.1. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on VTR as the stock returned 15.8% in the third quarter and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.