What Smart Money Thinks about First Potomac Realty Trust (FPO)?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: First Potomac Realty Trust (NYSE:FPO).

First Potomac Realty Trust (NYSE:FPO) registered a decrease in hedge fund sentiment during the third quarter. At the end of September, 13 hedge funds in our database held long positions in FPO. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Xenith Bankshares Inc (NASDAQ:XBKS), RPX Corp (NASDAQ:RPXC), and Unifi, Inc. (NYSE:UFI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

06photo/Shutterstock.com

Now, let’s view the key action surrounding First Potomac Realty Trust (NYSE:FPO).

What does the smart money think about First Potomac Realty Trust (NYSE:FPO)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, versus 13 funds quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in FPO heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in First Potomac Realty Trust (NYSE:FPO). Renaissance Technologies has a $9.9 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second largest stake is held by Israel Englander’s Millennium Management, which disclosed a $3.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism comprise Cliff Asness’ AQR Capital Management, D. E. Shaw’s D E Shaw, and Martin Whitman’s Third Avenue Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Because First Potomac Realty Trust (NYSE:FPO) has sustained a decline in interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds that elected to cut their full holdings last quarter. It’s worth mentioning that Andrew Axelrod’s Axar Capital dropped the largest investment of the 700 funds followed by Insider Monkey, comprising about $4.7 million in stock, and Jonathan Litt’s Land & Buildings Investment Management was right behind this move, as the fund cut about $4.2 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as First Potomac Realty Trust (NYSE:FPO) but similarly valued. We will take a look at Xenith Bankshares Inc (NASDAQ:XBKS), RPX Corp (NASDAQ:RPXC), Unifi, Inc. (NYSE:UFI), and AtriCure Inc. (NASDAQ:ATRC). All of these stocks’ market caps match FPO’s market cap.

As you can see these stocks had an average of 12 funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was just $19 million in FPO’s case. AtriCure Inc. (NASDAQ:ATRC) is the most popular stock in this table. On the other hand Xenith Bankshares Inc (NASDAQ:XBKS) is the least popular one with only six bullish hedge fund positions. First Potomac Realty Trust (NYSE:FPO) 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. In this regard ATRC might be a better candidate to consider taking a long position in.

Disclosure: None