We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Saul Centers Inc (NYSE:BFS).
Is Saul Centers Inc (NYSE:BFS) an attractive investment right now? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets fell by 5 lately. Our calculations also showed that BFS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). BFS was in 8 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 13 hedge funds in our database with BFS holdings at the end of the previous quarter.
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the latest hedge fund action encompassing Saul Centers Inc (NYSE:BFS).
What have hedge funds been doing with Saul Centers Inc (NYSE:BFS)?
Heading into the first quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BFS over the last 18 quarters. 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 Saul Centers Inc (NYSE:BFS), which was worth $29.6 million at the end of the third quarter. On the second spot was GLG Partners which amassed $5.4 million worth of shares. AQR Capital Management, Two Sigma Advisors, and Citadel Investment Group 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 Zebra Capital Management allocated the biggest weight to Saul Centers Inc (NYSE:BFS), around 0.29% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to BFS.
Since Saul Centers Inc (NYSE:BFS) has faced falling interest from the smart money, logic holds that there were a few hedgies that elected to cut their full holdings in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest position of the “upper crust” of funds watched by Insider Monkey, totaling close to $1.2 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dropped about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 5 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Saul Centers Inc (NYSE:BFS). These stocks are Range Resources Corp. (NYSE:RRC), Brigham Minerals, Inc. (NYSE:MNRL), Ferro Corporation (NYSE:FOE), and DHT Holdings Inc (NYSE:DHT). This group of stocks’ market caps match BFS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRC | 29 | 334202 | 2 |
| MNRL | 23 | 140394 | 9 |
| FOE | 16 | 159061 | -1 |
| DHT | 34 | 259748 | 10 |
| Average | 25.5 | 223351 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $42 million in BFS’s case. DHT Holdings Inc (NYSE:DHT) is the most popular stock in this table. On the other hand Ferro Corporation (NYSE:FOE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Saul Centers Inc (NYSE:BFS) is even less popular than FOE. Hedge funds dodged a bullet by taking a bearish stance towards BFS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately BFS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); BFS investors were disappointed as the stock returned -36.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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.
