Did Hedge Funds Drop The Ball On Agree Realty Corporation (ADC) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Agree Realty Corporation (NYSE:ADC) and determine whether the smart money was really smart about this stock.

Agree Realty Corporation (NYSE:ADC) has seen an increase in enthusiasm from smart money recently. Our calculations also showed that ADC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To most shareholders, hedge funds are viewed as unimportant, outdated financial tools of years past. While there are more than 8000 funds trading at the moment, Our researchers look at the aristocrats of this club, around 850 funds. It is estimated that this group of investors orchestrate most of the hedge fund industry’s total capital, and by tailing their matchless stock picks, Insider Monkey has identified several investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a gander at the recent hedge fund action regarding Agree Realty Corporation (NYSE:ADC).

What have hedge funds been doing with Agree Realty Corporation (NYSE:ADC)?

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the fourth quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in ADC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

More specifically, Zimmer Partners was the largest shareholder of Agree Realty Corporation (NYSE:ADC), with a stake worth $170.2 million reported as of the end of September. Trailing Zimmer Partners was Citadel Investment Group, which amassed a stake valued at $76.8 million. Millennium Management, Two Sigma Advisors, and D E Shaw 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 Hill Winds Capital allocated the biggest weight to Agree Realty Corporation (NYSE:ADC), around 3.79% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 3.77 percent of its 13F equity portfolio to ADC.

As one would reasonably expect, specific money managers were leading the bulls’ herd. JS Capital, managed by Jonathan Soros, initiated the biggest position in Agree Realty Corporation (NYSE:ADC). JS Capital had $0.9 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new ADC investors: Steve Cohen’s Point72 Asset Management, Mike Vranos’s Ellington, and Matthew Crandall Gilman’s Hill Winds Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Agree Realty Corporation (NYSE:ADC) but similarly valued. We will take a look at Brunswick Corporation (NYSE:BC), CVB Financial Corp. (NASDAQ:CVBF), Ardagh Group S.A. (NYSE:ARD), and ACI Worldwide Inc (NASDAQ:ACIW). This group of stocks’ market values resemble ADC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BC 23 411459 -13
CVBF 8 40046 -6
ARD 8 48967 -1
ACIW 24 271686 4
Average 15.75 193040 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $310 million in ADC’s case. ACI Worldwide Inc (NASDAQ:ACIW) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 8 bullish hedge fund positions. Agree Realty Corporation (NYSE:ADC) 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 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately ADC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ADC were disappointed as the stock returned 4.1% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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