Should You Buy DDR Corp (DDR)?

Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards DDR Corp (NYSE:DDR).

DDR Corp (NYSE:DDR) was in 16 hedge funds’ portfolios at the end of the third quarter of 2015. DDR shareholders have witnessed an increase in hedge fund interest lately. There were 14 hedge funds in our database with DDR positions at the end of the previous quarter. 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 Frontier Communications Corp (NASDAQ:FTR), CBOE Holdings, Inc (NASDAQ:CBOE), and East West Bancorp, Inc. (NASDAQ:EWBC) to gather more data points.

To most traders, hedge funds are viewed as worthless, old financial tools of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers choose to focus on the moguls of this group, about 700 funds. These investment experts shepherd the majority of the smart money’s total asset base, and by following their best picks, Insider Monkey has brought to light a number of investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to check out the latest action surrounding DDR Corp (NYSE:DDR).

What does the smart money think about DDR Corp (NYSE:DDR)?

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, John Khoury’s Long Pond Capital has the most valuable position in DDR Corp (NYSE:DDR), worth close to $97.1 million, corresponding to 4.2% of its total 13F portfolio. The second most bullish fund manager is AEW Capital Management, managed by Jeffrey Furber, which holds a $61.1 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of Greg Poole’s Echo Street Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Jim Simons’s Renaissance Technologies.

As aggregate interest increased, key money managers were breaking ground themselves. AEW Capital Management, managed by Jeffrey Furber, initiated the largest position in DDR Corp (NYSE:DDR). AEW Capital Management had $61.1 million invested in the company at the end of the quarter. Greg Poole’s Echo Street Capital Management also initiated a $19.1 million position during the quarter. The following funds were also among the new DDR investors: Chao Ku’s Nine Chapters Capital Management, David Costen Haley’s HBK Investments, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as DDR Corp (NYSE:DDR) but similarly valued. We will take a look at Frontier Communications Corp (NASDAQ:FTR), CBOE Holdings, Inc (NASDAQ:CBOE), East West Bancorp, Inc. (NASDAQ:EWBC), and Realogy Holdings Corp (NYSE:RLGY). This group of stocks’ market values resemble DDR’s market value.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $810 million. That figure was $232 million in DDR’s case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand, CBOE Holdings, Inc (NASDAQ:CBOE) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks DDR Corp (NYSE:DDR), with 16 bullish hedge fund positions is even less popular than CBOE. To comprehend why the smart money isn’t behind this stock, further analyzes are needed. This doesn’t necessarily mean it is not a stock worth buying; it is also possible that investors find it overvalued because they weren’t considering the bullish thesis. In any case, more research is warranted.