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Did Hedge Funds Make The Right Call On Mid America Apartment Communities Inc (MAA) ?

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 Mid America Apartment Communities Inc (NYSE:MAA) and determine whether hedge funds had an edge regarding this stock.

Is Mid America Apartment Communities Inc (NYSE:MAA) ready to rally soon? The best stock pickers were in a bullish mood. The number of long hedge fund bets inched up by 2 lately. Our calculations also showed that MAA 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). MAA was in 26 hedge funds’ portfolios at the end of March. There were 24 hedge funds in our database with MAA holdings at the end of the previous quarter.

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

To the average investor there are many gauges stock market investors employ to grade stocks. A pair of the best gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a very impressive amount (see the details here).

Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 we are checking out this tiny lithium stock. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Mid America Apartment Communities Inc (NYSE:MAA).

Hedge fund activity in Mid America Apartment Communities Inc (NYSE:MAA)

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MAA over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mid America Apartment Communities Inc (NYSE:MAA) was held by Fisher Asset Management, which reported holding $38.4 million worth of stock at the end of September. It was followed by Millennium Management with a $36.7 million position. Other investors bullish on the company included Renaissance Technologies, Diamond Hill Capital, and Zimmer Partners. In terms of the portfolio weights assigned to each position Wexford Capital allocated the biggest weight to Mid America Apartment Communities Inc (NYSE:MAA), around 1.35% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, setting aside 1.22 percent of its 13F equity portfolio to MAA.

Consequently, key money managers have jumped into Mid America Apartment Communities Inc (NYSE:MAA) headfirst. Zimmer Partners, managed by Stuart J. Zimmer, created the biggest position in Mid America Apartment Communities Inc (NYSE:MAA). Zimmer Partners had $28.3 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also made a $7.2 million investment in the stock during the quarter. The following funds were also among the new MAA investors: John Khoury’s Long Pond Capital, Paul Tudor Jones’s Tudor Investment Corp, and Charles Davidson and Joseph Jacobs’s Wexford Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mid America Apartment Communities Inc (NYSE:MAA) but similarly valued. These stocks are Xylem Inc (NYSE:XYL), Tyler Technologies, Inc. (NYSE:TYL), Sun Communities Inc (NYSE:SUI), and Pioneer Natural Resources Company (NYSE:PXD). This group of stocks’ market values resemble MAA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XYL 27 428104 6
TYL 30 405643 9
SUI 28 323201 -3
PXD 40 534807 -13
Average 31.25 422939 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $423 million. That figure was $245 million in MAA’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Mid America Apartment Communities Inc (NYSE:MAA) is even less popular than XYL. Hedge funds dodged a bullet by taking a bearish stance towards MAA. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 15.5 percentage points. Unfortunately MAA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); MAA investors were disappointed as the stock returned 12.3% during the second quarter 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 so far in 2020.

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