What Hedge Funds Think Of These Two Stocks On A Roll Today

News of Biomed Realty Trust Inc (NYSE:BMR) looking to sell itself has been warmly received by Wall Street, with the stock opening over 10% higher today and currently trading up by more than 13%. According to Bloomberg, the company has attracted the attention of several firms, including Blackstone Group LP (NYSE:BX), with Morgan Stanley set to broker a deal. Representatives of all three firms have declined to comment. In other news, the United States’ largest life insurer, Metlife Inc (NYSE:MET), has increased its share buyback program from $261 million to $1 billion. The market reacted positively to the news, with the stock opening 0.69% higher today. After surging even higher, it has since fallen back close to where it’s opening, trading up by 0.56% on the day. While the news on the companies may be positive, hedge funds’ sentiment towards them is mixed.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 57.6 percentage points (118% return vs. the S&P 500’s 60.4% gain) over the last 36 months (see the details here).

A real estate investment trust, Biomed Realty Trust Inc (NYSE:BMR) manages high-tech laboratory properties collectively valued at more than $8 billion. On September 15, the company announced a 2015 third quarter dividend of $0.26 per share, providing a healthy yield of 5.29%. The stock’s trailing Price to Earnings (P/E) ratio of 21.xx is just less than half the industry average of 51.10, while the forward P/E ratio of 12.79 hints at some untapped financial potential.

Hedge fund sentiment towards Biomed Realty Trust Inc (NYSE:BMR) slightly deteriorated during the second quarter of 2015, as the stock was slowly but steadily losing value. The number of funds holding the stock decreased to 11 from 12, with the cumulative value of their holdings falling by 19.5% to $128 million. Billionaire Ken Griffin dumped 88% of his stake in the company, leaving his fund, Citadel Investment Group, with just 43,708 shares. Ken Fisher and Jim Simons have not shared Griffin’s pessimism about the stock, having increased their holdings during the quarter. Fisher’s Fisher Asset Management reported a 2% increase in its stake to 2.02 million shares, while Simons’ Renaissance Technologies held 549,400 shares, up by 43% during the quarter.

Considered a systemically important financial institution, or “too big to fail”, Metlife Inc (NYSE:MET) is seeking to return cash to shareholders, as the company awaits clarity on capital requirements following the 2008 financial crisis. This label might have a major impact on the capital it needs to set aside according to the new, stricter rules.

Excess capital belongs to MetLife’s shareholders. This new authorization is consistent with the prudent capital management strategy we have been employing,” said Steven Kandarian, CEO of MetLife.

So far this year, the company’s stock has shed 14.8% of its value and looks poised to go even lower, with the management having recently issued revised forward guidance for the third quarter. Profits are expected to decrease by $792 million or $0.70 per share on account of tax costs incurred by a U.K subsidiary. In general, hedge fund sentiment towards the insurance giant significantly improved during the second quarter, with ten more funds holding positions and lifting the total tally of hedge funds betting on the stock to 55. The total value of their investments exceeded $2.7 billion at the end of June, having increased by 41% during the quarter.

Andreas Halvorsen is a big fan of Metlife Inc (NYSE:MET), with his fund, Viking Global, holding the biggest stake in the company among the hedge funds that we track: 11.7 million shares, up by 77% during the second quarter. Cliff Asness has also significantly increased his bet on this stock, taking his holding to roughly 2.57 million shares, according to AQR Capital Management’s latest 13F filing. Fir Tree, founded by Jeffrey Tannenbaum, on the other hand, felt that reducing its stake was more appropriate, cutting it by 34% during the quarter. Fir Tree reportedly holds 5.08 million shares as of June 30, 2015.

Disclosure: None