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Did Hedge Funds Drop The Ball On Rexford Industrial Realty Inc (REXR) ?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Rexford Industrial Realty Inc (NYSE:REXR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Rexford Industrial Realty Inc (NYSE:REXR) going to take off soon? Hedge funds are taking a pessimistic view. The number of bullish hedge fund bets went down by 4 recently. Our calculations also showed that REXR isn’t among the 30 most popular stocks among hedge funds (view the video below). REXR was in 17 hedge funds’ portfolios at the end of the second quarter of 2019. There were 21 hedge funds in our database with REXR positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

GAMCO Investors, Mario Gabelli

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Rexford Industrial Realty Inc (NYSE:REXR).

How have hedgies been trading Rexford Industrial Realty Inc (NYSE:REXR)?

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards REXR over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

REXR_oct2019

More specifically, AEW Capital Management was the largest shareholder of Rexford Industrial Realty Inc (NYSE:REXR), with a stake worth $108.3 million reported as of the end of March. Trailing AEW Capital Management was Renaissance Technologies, which amassed a stake valued at $30.1 million. Carlson Capital, Millennium Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Since Rexford Industrial Realty Inc (NYSE:REXR) has witnessed declining sentiment from the smart money, logic holds that there is a sect of money managers that decided to sell off their entire stakes last quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest position of all the hedgies tracked by Insider Monkey, valued at close to $6.9 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $4.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rexford Industrial Realty Inc (NYSE:REXR) but similarly valued. We will take a look at Cinemark Holdings, Inc. (NYSE:CNK), Stericycle Inc (NASDAQ:SRCL), Webster Financial Corporation (NYSE:WBS), and Nomad Foods Limited Ordinary Shares (NYSE:NOMD). This group of stocks’ market values resemble REXR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNK 22 197886 2
SRCL 16 648059 -6
WBS 22 364737 -3
NOMD 32 475831 -10
Average 23 421628 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $422 million. That figure was $202 million in REXR’s case. Nomad Foods Limited Ordinary Shares (NYSE:NOMD) is the most popular stock in this table. On the other hand Stericycle Inc (NASDAQ:SRCL) is the least popular one with only 16 bullish hedge fund positions. Rexford Industrial Realty Inc (NYSE:REXR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on REXR as the stock returned 9.5% during the same time frame and outperformed the market by an even larger margin.

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

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