Should You Avoid Empire State Realty Trust Inc (ESRT)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the successful investors’ consensus returns have been exceptional. The top 30 mid-cap stocks among the best performing hedge funds in our database yielded an average return of 18% during the last 12 months, outperforming the S&P 500 Index funds by double digits. Although the successful funds occasionally have their duds, such as SunEdison and Valeant, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Empire State Realty Trust Inc (NYSE:ESRT) .

Is Empire State Realty Trust Inc (NYSE:ESRT) undervalued? Money managers are altogether actually taking a pessimistic view. The number of bullish hedge fund bets that are revealed through the 13F filings fell by 3 lately. There were 11 hedge funds in our database with ESRT holdings at the end of September. At the end of this article we will also compare ESRT to other stocks including Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Commscope Holding Company Inc (NASDAQ:COMM), and Burlington Stores Inc (NYSE:BURL) to get a better sense of its popularity.

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.

Keeping this in mind, let’s review the fresh action encompassing Empire State Realty Trust Inc (NYSE:ESRT).

How have hedgies been trading Empire State Realty Trust Inc (NYSE:ESRT)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the second quarter of 2016. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the most valuable position in Empire State Realty Trust Inc (NYSE:ESRT), worth close to $87.1 million, corresponding to 0.2% of its total 13F portfolio. Coming in second is AEW Capital Management, which holds a $66.5 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Ken Griffin’s Citadel Investment Group, Dmitry Balyasny’s Balyasny Asset Management and Richard Driehaus’s Driehaus Capital. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.

Because Empire State Realty Trust Inc (NYSE:ESRT) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few money managers that slashed their full holdings by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $31 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $7.6 million worth of shares.

Let’s check out hedge fund activity in other stocks similar to Empire State Realty Trust Inc (NYSE:ESRT). We will take a look at Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Commscope Holding Company Inc (NASDAQ:COMM), Burlington Stores Inc (NYSE:BURL), and Voya Financial Inc (NYSE:VOYA). This group of stocks’ market caps match ESRT’s market cap.

As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1313 million. That figure was $197 million in ESRT’s case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Empire State Realty Trust Inc (NYSE:ESRT) is even less popular than ALNY. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None