Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about EPR Properties (NYSE:EPR).
Is EPR Properties (NYSE:EPR) the right investment to pursue these days? Money managers are taking a bearish view. The number of long hedge fund bets were trimmed by 2 lately. Our calculations also showed that EPR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). EPR was in 18 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with EPR holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the key hedge fund action encompassing EPR Properties (NYSE:EPR).
How have hedgies been trading EPR Properties (NYSE:EPR)?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EPR over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in EPR Properties (NYSE:EPR) was held by Weiss Asset Management, which reported holding $37.1 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $29.3 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Weiss Asset Management allocated the biggest weight to EPR Properties (NYSE:EPR), around 2.96% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, dishing out 1.71 percent of its 13F equity portfolio to EPR.
Judging by the fact that EPR Properties (NYSE:EPR) has experienced a decline in interest from the smart money, it’s easy to see that there was a specific group of money managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling about $2.2 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dumped its stock, about $2.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as EPR Properties (NYSE:EPR) but similarly valued. We will take a look at Vipshop Holdings Limited (NYSE:VIPS), RealPage, Inc. (NASDAQ:RP), Casey’s General Stores, Inc. (NASDAQ:CASY), and Guardant Health, Inc. (NASDAQ:GH). This group of stocks’ market valuations match EPR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIPS | 22 | 244059 | 5 |
| RP | 31 | 569288 | -2 |
| CASY | 16 | 103612 | -2 |
| GH | 24 | 410215 | 5 |
| Average | 23.25 | 331794 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $201 million in EPR’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Casey’s General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 16 bullish hedge fund positions. EPR Properties (NYSE:EPR) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EPR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EPR investors were disappointed as the stock returned -6.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
