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Did Hedge Funds Drop The Ball On Urban Edge Properties (UE) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Urban Edge Properties (NYSE:UE) and determine whether hedge funds had an edge regarding this stock.

Urban Edge Properties (NYSE:UE) was in 21 hedge funds’ portfolios at the end of the first quarter of 2020. UE shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 19 hedge funds in our database with UE positions at the end of the previous quarter. Our calculations also showed that UE 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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. Now let’s take a glance at the key hedge fund action surrounding Urban Edge Properties (NYSE:UE).

How have hedgies been trading Urban Edge Properties (NYSE:UE)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards UE over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is UE A Good Stock To Buy?

The largest stake in Urban Edge Properties (NYSE:UE) was held by Renaissance Technologies, which reported holding $17.1 million worth of stock at the end of September. It was followed by Carlson Capital with a $12.9 million position. Other investors bullish on the company included Millennium Management, Gillson Capital, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Urban Edge Properties (NYSE:UE), around 1.04% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, setting aside 0.34 percent of its 13F equity portfolio to UE.

As one would reasonably expect, specific money managers have been driving this bullishness. Carlson Capital, managed by Clint Carlson, created the biggest position in Urban Edge Properties (NYSE:UE). Carlson Capital had $12.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $4.8 million position during the quarter. The following funds were also among the new UE investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Urban Edge Properties (NYSE:UE) but similarly valued. We will take a look at PennyMac Mortgage Investment Trust (NYSE:PMT), Gray Television, Inc. (NYSE:GTN), Myriad Genetics, Inc. (NASDAQ:MYGN), and United States Steel Corporation (NYSE:X). This group of stocks’ market valuations match UE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PMT 12 56020 -7
GTN 21 131988 -3
MYGN 11 102643 -4
X 17 36676 -9
Average 15.25 81832 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $69 million in UE’s case. Gray Television, Inc. (NYSE:GTN) is the most popular stock in this table. On the other hand Myriad Genetics, Inc. (NASDAQ:MYGN) is the least popular one with only 11 bullish hedge fund positions. Urban Edge Properties (NYSE:UE) 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 UE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UE were disappointed as the stock returned 15% 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.