Stag Industrial Inc (STAG): Hedge Funds Cashing Out

In this article you are going to find out whether hedge funds think Stag Industrial Inc (NYSE:STAG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Stag Industrial Inc (NYSE:STAG) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that STAG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the fresh hedge fund action encompassing Stag Industrial Inc (NYSE:STAG).

What does smart money think about Stag Industrial Inc (NYSE:STAG)?

At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in STAG a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in Stag Industrial Inc (NYSE:STAG), worth close to $19.8 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Eduardo Abush of Waterfront Capital Partners, with a $11.2 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Ken Griffin’s Citadel Investment Group, Paul Marshall and Ian Wace’s Marshall Wace LLP and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Stag Industrial Inc (NYSE:STAG), around 13.8% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, earmarking 1.37 percent of its 13F equity portfolio to STAG.

Since Stag Industrial Inc (NYSE:STAG) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds that elected to cut their full holdings by the end of the first quarter. It’s worth mentioning that Renaissance Technologies cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $20.2 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund cut about $2.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Stag Industrial Inc (NYSE:STAG). These stocks are Grupo Televisa SAB (NYSE:TV), Mirati Therapeutics, Inc. (NASDAQ:MRTX), Cabot Microelectronics Corporation (NASDAQ:CCMP), and The Wendy’s Company (NASDAQ:WEN). This group of stocks’ market values are closest to STAG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $636 million. That figure was $79 million in STAG’s case. The Wendy’s Company (NASDAQ:WEN) is the most popular stock in this table. On the other hand Cabot Microelectronics Corporation (NASDAQ:CCMP) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Stag Industrial Inc (NYSE:STAG) is even less popular than CCMP. Hedge funds clearly dropped the ball on STAG as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on STAG as the stock returned 28.5% so far in the second quarter and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.