We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 City Office REIT Inc (NYSE:CIO).
Is City Office REIT Inc (NYSE:CIO) going to take off soon? The best stock pickers are taking an optimistic view. The number of long hedge fund bets increased by 1 lately. Our calculations also showed that CIO isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action regarding City Office REIT Inc (NYSE:CIO).
How are hedge funds trading City Office REIT Inc (NYSE:CIO)?
At Q2’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CIO over the last 16 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of City Office REIT Inc (NYSE:CIO), with a stake worth $22.1 million reported as of the end of March. Trailing Renaissance Technologies was Marathon Asset Management, which amassed a stake valued at $1.2 million. Citadel Investment Group, Millennium Management, and Winton Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the most outsized position in City Office REIT Inc (NYSE:CIO). Millennium Management had $0.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.1 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as City Office REIT Inc (NYSE:CIO) but similarly valued. We will take a look at Independent Bank Corporation (NASDAQ:IBCP), Barnes & Noble, Inc. (NYSE:BKS), First Financial Corporation (NASDAQ:THFF), and ObsEva SA (NASDAQ:OBSV). This group of stocks’ market caps are closest to CIO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBCP | 11 | 46909 | 0 |
| BKS | 12 | 40157 | -6 |
| THFF | 9 | 14616 | 2 |
| OBSV | 8 | 64275 | -3 |
| Average | 10 | 41489 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $24 million in CIO’s case. Barnes & Noble, Inc. (NYSE:BKS) is the most popular stock in this table. On the other hand ObsEva SA (NASDAQ:OBSV) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks City Office REIT Inc (NYSE:CIO) is even less popular than OBSV. Hedge funds clearly dropped the ball on CIO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CIO as the stock returned 22.3% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
