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Did Hedge Funds Make The Right Call On EPR Properties (EPR)?

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 EPR Properties (NYSE:EPR) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is EPR Properties (NYSE:EPR) a buy right now? Hedge funds were in a pessimistic mood. The number of bullish hedge fund positions dropped by 1 in recent months. Our calculations also showed that EPR 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.

According to most traders, hedge funds are perceived as underperforming, outdated investment vehicles of years past. While there are over 8000 funds with their doors open at the moment, Our researchers choose to focus on the crème de la crème of this club, about 850 funds. These hedge fund managers have their hands on the lion’s share of all hedge funds’ total asset base, and by tracking their best stock picks, Insider Monkey has figured out many investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year 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 .

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s review the latest hedge fund action surrounding EPR Properties (NYSE:EPR).

How are hedge funds trading EPR Properties (NYSE:EPR)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in EPR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in EPR Properties (NYSE:EPR) was held by Nut Tree Capital, which reported holding $46 million worth of stock at the end of September. It was followed by Millennium Management with a $12.7 million position. Other investors bullish on the company included Two Sigma Advisors, Weiss Asset Management, and Nut Tree Capital. In terms of the portfolio weights assigned to each position Nut Tree Capital allocated the biggest weight to EPR Properties (NYSE:EPR), around 20.65% of its 13F portfolio. LDR Capital is also relatively very bullish on the stock, setting aside 10.34 percent of its 13F equity portfolio to EPR.

Because EPR Properties (NYSE:EPR) has experienced declining sentiment from hedge fund managers, we can see that there were a few money managers that decided to sell off their entire stakes heading into Q4. At the top of the heap, Andrew Weiss’s Weiss Asset Management dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $36.5 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund said goodbye to about $35.8 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to EPR Properties (NYSE:EPR). We will take a look at Wyndham Destinations, Inc. (NYSE:WYND), Fulton Financial Corp (NASDAQ:FULT), Eidos Therapeutics, Inc. (NASDAQ:EIDX), and AMTD International Inc. (NYSE:HKIB). This group of stocks’ market caps resemble EPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WYND 25 200324 -3
FULT 14 12965 0
EIDX 12 271572 -8
HKIB 1 15174 0
Average 13 125009 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $149 million in EPR’s case. Wyndham Destinations, Inc. (NYSE:WYND) is the most popular stock in this table. On the other hand AMTD International Inc. (NYSE:HKIB) is the least popular one with only 1 bullish hedge fund positions. EPR Properties (NYSE:EPR) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on EPR as the stock returned 38.7% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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