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Did Hedge Funds Make The Right Call On Jones Lang LaSalle Inc (JLL)?

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 Jones Lang LaSalle Inc (NYSE:JLL) and determine whether the smart money was really smart about this stock.

Is Jones Lang LaSalle Inc (NYSE:JLL) ready to rally soon? Investors who are in the know were becoming less confident. The number of long hedge fund bets were cut by 4 recently. Our calculations also showed that JLL 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). JLL was in 26 hedge funds’ portfolios at the end of March. There were 30 hedge funds in our database with JLL positions at the end of the previous quarter.

Video: 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 S&P 500 ETFs by more than 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 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 stocks that are in our short portfolio.

David Blood

David Blood of Generation Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the latest hedge fund action surrounding Jones Lang LaSalle Inc (NYSE:JLL).

How are hedge funds trading Jones Lang LaSalle Inc (NYSE:JLL)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JLL over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the biggest position in Jones Lang LaSalle Inc (NYSE:JLL), worth close to $483.9 million, accounting for 3.4% of its total 13F portfolio. Sitting at the No. 2 spot is John W. Rogers of Ariel Investments, with a $81 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Ric Dillon’s Diamond Hill Capital, John Khoury’s Long Pond Capital and Bryan Hinmon’s Motley Fool Asset Management. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to Jones Lang LaSalle Inc (NYSE:JLL), around 5.11% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, setting aside 3.49 percent of its 13F equity portfolio to JLL.

Since Jones Lang LaSalle Inc (NYSE:JLL) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers who were dropping their positions entirely last quarter. At the top of the heap, Ken Heebner’s Capital Growth Management dropped the largest position of all the hedgies watched by Insider Monkey, worth an estimated $32.2 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also dumped its stock, about $26.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Jones Lang LaSalle Inc (NYSE:JLL) but similarly valued. We will take a look at American Airlines Group Inc (NASDAQ:AAL), CubeSmart (NYSE:CUBE), Pearson PLC (NYSE:PSO), and Wix.Com Ltd (NASDAQ:WIX). This group of stocks’ market valuations match JLL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAL 36 681734 -5
CUBE 18 185612 -9
PSO 8 10618 3
WIX 29 597387 -5
Average 22.75 368838 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $660 million in JLL’s case. American Airlines Group Inc (NASDAQ:AAL) 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. Jones Lang LaSalle Inc (NYSE:JLL) 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately JLL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JLL were disappointed as the stock returned 2.5% 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.