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 (10 coronavirus predictions).
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 Apartment Investment and Management Co. (NYSE:AIV).
Is Apartment Investment and Management Co. (NYSE:AIV) a buy, sell, or hold? The smart money is in a pessimistic mood. The number of bullish hedge fund positions went down by 4 lately. Our calculations also showed that AIV 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).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind we’re going to review the latest hedge fund action surrounding Apartment Investment and Management Co. (NYSE:AIV).
How are hedge funds trading Apartment Investment and Management Co. (NYSE:AIV)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in AIV a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Apartment Investment and Management Co. (NYSE:AIV), which was worth $244.1 million at the end of the third quarter. On the second spot was Long Pond Capital which amassed $112.8 million worth of shares. Balyasny Asset Management, D E Shaw, and Millennium 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 Apartment Investment and Management Co. (NYSE:AIV), around 2.88% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, setting aside 2.53 percent of its 13F equity portfolio to AIV.
Due to the fact that Apartment Investment and Management Co. (NYSE:AIV) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few funds who were dropping their full holdings last quarter. It’s worth mentioning that Stuart J. Zimmer’s Zimmer Partners said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, comprising about $23.5 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund cut about $19.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Apartment Investment and Management Co. (NYSE:AIV) but similarly valued. We will take a look at IPG Photonics Corporation (NASDAQ:IPGP), Amarin Corporation plc (NASDAQ:AMRN), PVH Corp (NYSE:PVH), and BioNTech SE (NASDAQ:BNTX). This group of stocks’ market valuations match AIV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IPGP | 25 | 194608 | 8 |
| AMRN | 36 | 1534460 | 6 |
| PVH | 29 | 1023740 | -3 |
| BNTX | 4 | 29499 | 4 |
| Average | 23.5 | 695577 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $696 million. That figure was $582 million in AIV’s case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand BioNTech SE (NASDAQ:BNTX) is the least popular one with only 4 bullish hedge fund positions. Apartment Investment and Management Co. (NYSE:AIV) 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. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately AIV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AIV were disappointed as the stock returned -30.7% 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 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.
