Were Hedge Funds Wrong About Selling Prologis Inc (PLD)?

In this article we will take a look at whether hedge funds think Prologis Inc (NYSE:PLD) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Prologis Inc (NYSE:PLD) a buy, sell, or hold? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions fell by 5 in recent months. Prologis Inc (NYSE:PLD) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 40. Our calculations also showed that PLD isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Talpins of Element Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best high dividend stocks to buy to identify high dividend stocks with upside potential in this low interest rate environment. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing Prologis Inc (NYSE:PLD).

Hedge fund activity in Prologis Inc (NYSE:PLD)

At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in PLD a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Prologis Inc (NYSE:PLD), which was worth $83.5 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $79.9 million worth of shares. Millennium Management, Renaissance Technologies, 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 Third Avenue Management allocated the biggest weight to Prologis Inc (NYSE:PLD), around 4.77% of its 13F portfolio. Bourgeon Capital is also relatively very bullish on the stock, earmarking 1.59 percent of its 13F equity portfolio to PLD.

Because Prologis Inc (NYSE:PLD) has experienced falling interest from the smart money, logic holds that there exists a select few hedgies who were dropping their full holdings last quarter. Interestingly, Josh Donfeld and David Rogers’s Castle Hook Partners said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $38 million in stock, and Jonathan Litt’s Land & Buildings Investment Management was right behind this move, as the fund dropped about $25.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Prologis Inc (NYSE:PLD) but similarly valued. These stocks are Caterpillar Inc. (NYSE:CAT), Dominion Energy Inc. (NYSE:D), The Goldman Sachs Group, Inc. (NYSE:GS), The Estee Lauder Companies Inc (NYSE:EL), The Blackstone Group Inc. (NYSE:BX), Stryker Corporation (NYSE:SYK), and Intuitive Surgical, Inc. (NASDAQ:ISRG). All of these stocks’ market caps are similar to PLD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.7 hedge funds with bullish positions and the average amount invested in these stocks was $1652 million. That figure was $433 million in PLD’s case. The Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Dominion Energy Inc. (NYSE:D) is the least popular one with only 33 bullish hedge fund positions. Prologis Inc (NYSE:PLD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLD is 29. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 23% in 2020 through October 30th and beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on PLD, though not to the same extent, as the stock returned 6.9% since the end of Q2 (through October 30th) and outperformed the market.

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