Should You Avoid Lexington Realty Trust (LXP)?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Is Lexington Realty Trust (NYSE:LXP) the right pick for your portfolio? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund positions fell by 2 recently. 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 GATX Corporation (NYSE:GMT), Balchem Corporation (NASDAQ:BCPC), and AllianceBernstein Income Fund Inc. (NYSE:ACG) to gather more data points.

Now, we’re going to review the fresh action regarding Lexington Realty Trust (NYSE:LXP).

Hedge fund activity in Lexington Realty Trust (NYSE:LXP)

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in Lexington Realty Trust (NYSE:LXP), worth close to $16.3 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Dmitry Balyasny of Balyasny Asset Management, with a $15.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Greg Poole’s Echo Street Capital Management, J. Alan Reid, Jr.’s Forward Management and Lee Munder’s Lee Munder Capital Group.

Judging by the fact that Lexington Realty Trust (NYSE:LXP) has faced falling interest from the smart money, it’s safe to say that there were a few money managers that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Eduardo Abush’s Waterfront Capital Partners said goodbye to the largest position of all the hedgies monitored by Insider Monkey, valued at an estimated $5 million in stock, and Eric Halet and Davide Serra’s Algebris Investments was right behind this move, as the fund dropped about $2.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Lexington Realty Trust (NYSE:LXP). These stocks are GATX Corporation (NYSE:GMT), Balchem Corporation (NASDAQ:BCPC), AllianceBernstein Income Fund Inc. (NYSE:ACG), and Alexander’s, Inc. (NYSE:ALX). All of these stocks’ market caps are similar to LXP’s market cap.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $100 million in LXP’s case. GATX Corporation (NYSE:GMT) is the most popular stock in this table. On the other hand Alexander’s, Inc. (NYSE:ALX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Lexington Realty Trust (NYSE:LXP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail despite the number of funds long the stock declining by 2.