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Did Hedge Funds Make The Right Call On Regency Centers Corp (REG)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Regency Centers Corp (NYSE:REG) based on that data and determine whether they were really smart about the stock.

Regency Centers Corp (NYSE:REG) shareholders have witnessed an increase in hedge fund interest recently. Our calculations also showed that REG 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.

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.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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 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. Now let’s view the recent hedge fund action encompassing Regency Centers Corp (NYSE:REG).

How are hedge funds trading Regency Centers Corp (NYSE:REG)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards REG 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 REG A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Regency Centers Corp (NYSE:REG). Citadel Investment Group has a $88.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $42.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions consist of D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Regency Centers Corp (NYSE:REG), around 3.67% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.54 percent of its 13F equity portfolio to REG.

As one would reasonably expect, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, created the most outsized position in Regency Centers Corp (NYSE:REG). Millennium Management had $6.9 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $2.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Mike Vranos’s Ellington, and Bruce Kovner’s Caxton Associates LP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Regency Centers Corp (NYSE:REG) but similarly valued. We will take a look at AptarGroup, Inc. (NYSE:ATR), PagSeguro Digital Ltd. (NYSE:PAGS), Eastman Chemical Company (NYSE:EMN), and American Financial Group (NYSE:AFG). All of these stocks’ market caps resemble REG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATR 20 156311 -5
PAGS 20 490881 -1
EMN 29 233593 -3
AFG 24 200932 -1
Average 23.25 270429 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $270 million. That figure was $167 million in REG’s case. Eastman Chemical Company (NYSE:EMN) is the most popular stock in this table. On the other hand AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Regency Centers Corp (NYSE:REG) is even less popular than ATR. Hedge funds dodged a bullet by taking a bearish stance towards REG. 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 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately REG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); REG investors were disappointed as the stock returned 5.6% 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 so far in 2020.

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