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 Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. 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 SL Green Realty Corp (NYSE:SLG).
SL Green Realty Corp (NYSE:SLG) was in 24 hedge funds’ portfolios at the end of September. SLG investors should be aware of an increase in support from the world’s most elite money managers lately. There were 15 hedge funds in our database with SLG positions at the end of the previous quarter. Our calculations also showed that SLG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Today there are a multitude of tools stock traders can use to assess publicly traded companies. A duo of the less known tools are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace their index-focused peers by a solid amount (see the details here).
Paul Marshall of Marshall Wace
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a peek at the fresh hedge fund action encompassing SL Green Realty Corp (NYSE:SLG).
What does smart money think about SL Green Realty Corp (NYSE:SLG)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 60% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in SLG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in SL Green Realty Corp (NYSE:SLG), which was worth $129.6 million at the end of the third quarter. On the second spot was Long Pond Capital which amassed $95.4 million worth of shares. Levin Easterly Partners, Citadel Investment Group, and Winton Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to SL Green Realty Corp (NYSE:SLG), around 2.49% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, setting aside 1.68 percent of its 13F equity portfolio to SLG.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Levin Easterly Partners, managed by John Murphy, established the most valuable position in SL Green Realty Corp (NYSE:SLG). Levin Easterly Partners had $59.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $3.4 million position during the quarter. The other funds with brand new SLG positions are Matthew Tewksbury’s Stevens Capital Management, Donald Sussman’s Paloma Partners, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SL Green Realty Corp (NYSE:SLG) but similarly valued. We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), LATAM Airlines Group S.A. (NYSE:LTM), Monolithic Power Systems, Inc. (NASDAQ:MPWR), and CubeSmart (NYSE:CUBE). This group of stocks’ market caps are closest to SLG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LPLA | 34 | 1015258 | 3 |
| LTM | 9 | 28716 | 4 |
| MPWR | 22 | 192922 | -1 |
| CUBE | 23 | 308978 | 5 |
| Average | 22 | 386469 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $441 million in SLG’s case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 9 bullish hedge fund positions. SL Green Realty Corp (NYSE:SLG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SLG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SLG were disappointed as the stock returned 21% in 2019 and trailed 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
