Did Hedge Funds Make The Right Call On CubeSmart (CUBE) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards CubeSmart (NYSE:CUBE) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is CubeSmart (NYSE:CUBE) a buy, sell, or hold? The smart money was selling. The number of bullish hedge fund bets decreased by 9 recently. Our calculations also showed that CUBE 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). CUBE was in 18 hedge funds’ portfolios at the end of March. There were 27 hedge funds in our database with CUBE positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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Ken Heebner of Capital Growth Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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 glance at the latest hedge fund action surrounding CubeSmart (NYSE:CUBE).

What does smart money think about CubeSmart (NYSE:CUBE)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in CUBE a year ago. So, let’s check out 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, Diamond Hill Capital, managed by Ric Dillon, holds the number one position in CubeSmart (NYSE:CUBE). Diamond Hill Capital has a $102.1 million position in the stock, comprising 0.7% of its 13F portfolio. On Diamond Hill Capital’s heels is Echo Street Capital Management, managed by Greg Poole, which holds a $17.9 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions encompass Ken Heebner’s Capital Growth Management, Renaissance Technologies and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to CubeSmart (NYSE:CUBE), around 2.26% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, setting aside 0.69 percent of its 13F equity portfolio to CUBE.

Since CubeSmart (NYSE:CUBE) has witnessed bearish sentiment from the smart money, it’s safe to say that there were a few funds that slashed their entire stakes heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, worth about $7.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $4.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to CubeSmart (NYSE:CUBE). We will take a look at Pearson PLC (NYSE:PSO), Wix.Com Ltd (NASDAQ:WIX), Lincoln National Corporation (NYSE:LNC), and Lamar Advertising Company (REIT) (NASDAQ:LAMR). All of these stocks’ market caps match CUBE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSO 8 10618 3
WIX 29 597387 -5
LNC 26 602265 -14
LAMR 34 217189 6
Average 24.25 356865 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $186 million in CUBE’s case. Lamar Advertising Company (REIT) (NASDAQ:LAMR) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 8 bullish hedge fund positions. CubeSmart (NYSE:CUBE) 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. 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 and surpassed the market by 17.1 percentage points. Unfortunately CUBE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CUBE investors were disappointed as the stock returned 4.6% since Q1 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 most of these stocks already outperformed the market in 2020.

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