Should You Avoid Investors Real Estate Trust (IRET)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Investors Real Estate Trust (NYSE:IRET).

Investors Real Estate Trust (NYSE:IRET) investors should pay attention to a decrease in support from the world’s most successful money managers of late. There were 9 hedge funds in our database with IRET holdings at the end of the previous quarter. There were 8 at the end of Q3. At the end of this article we will also compare IRET to other stocks including Leju Holdings Ltd (ADR) (NYSE:LEJU), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), and Douglas Dynamics Inc (NYSE:PLOW) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, we’re going to take a look at the key action encompassing Investors Real Estate Trust (NYSE:IRET).

What does the smart money think about Investors Real Estate Trust (NYSE:IRET)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IRET over the last 5 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies,one of the largest hedge funds in the world, holds the largest position in Investors Real Estate Trust (NYSE:IRET). Renaissance Technologies has a $13.1 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, which holds a $0.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include D E Shaw, Ray Carroll’s Breton Hill Capital and Adam Usdan’s Trellus Management Company. 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 Investors Real Estate Trust (NYSE:IRET) has encountered a decline in interest from hedge fund managers, we can see that there exists a select few hedgies who sold off their full holdings heading into Q4. At the top of the heap, Israel Englander’s Millennium Management cut the largest stake of all the hedgies studied by Insider Monkey, valued at an estimated $1.6 million in stock, and Clinton Group was right behind this move, as the fund said goodbye to about $0.3 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Investors Real Estate Trust (NYSE:IRET) but similarly valued. These stocks are Leju Holdings Ltd (ADR) (NYSE:LEJU), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), Douglas Dynamics Inc (NYSE:PLOW), and Corcept Therapeutics Incorporated (NASDAQ:CORT). This group of stocks’ market valuations are closest to IRET’s market valuation.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $15 million in IRET’s case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Leju Holdings Ltd (ADR) (NYSE:LEJU) is the least popular one with only 4 bullish hedge fund positions. Investors Real Estate Trust (NYSE:IRET) 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 VNDA might be a better candidate to consider taking a long position in.