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. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Simon Property Group, Inc (NYSE:SPG) based on that data.
Is Simon Property Group, Inc (NYSE:SPG) a buy here? The smart money is getting less bullish. The number of long hedge fund bets decreased by 3 recently. Our calculations also showed that SPG 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).
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 41 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.
Matthew Hulsizer of PEAK6 Capital
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. Keeping this in mind we’re going to view the key hedge fund action surrounding Simon Property Group, Inc (NYSE:SPG).
How have hedgies been trading Simon Property Group, Inc (NYSE:SPG)?
At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in SPG a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Simon Property Group, Inc (NYSE:SPG) was held by Two Sigma Advisors, which reported holding $161.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $133.1 million position. Other investors bullish on the company included Renaissance Technologies, Adage Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Pittencrieff Partners – Gabalex Capital allocated the biggest weight to Simon Property Group, Inc (NYSE:SPG), around 3.9% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, earmarking 3.03 percent of its 13F equity portfolio to SPG.
Since Simon Property Group, Inc (NYSE:SPG) has witnessed falling interest from the smart money, we can see that there were a few money managers that slashed their full holdings by the end of the third quarter. At the top of the heap, Ray Dalio’s Bridgewater Associates dropped the largest position of all the hedgies watched by Insider Monkey, comprising close to $25.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $18.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Simon Property Group, Inc (NYSE:SPG). We will take a look at UBS Group AG (NYSE:UBS), Activision Blizzard, Inc. (NASDAQ:ATVI), Banco Santander (Brasil) SA (NYSE:BSBR), and Moody’s Corporation (NYSE:MCO). This group of stocks’ market caps match SPG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBS | 14 | 1045423 | -2 |
| ATVI | 76 | 2811204 | 3 |
| BSBR | 8 | 91437 | -7 |
| MCO | 49 | 9218123 | -6 |
| Average | 36.75 | 3291547 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $3292 million. That figure was $580 million in SPG’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 8 bullish hedge fund positions. Simon Property Group, Inc (NYSE:SPG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately SPG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SPG investors were disappointed as the stock returned -56.9% 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 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.
