Did Hedge Funds Make The Right Call On Ventas, Inc. (VTR) ?

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 Ventas, Inc. (NYSE:VTR) based on that data and determine whether they were really smart about the stock.

Ventas, Inc. (NYSE:VTR) investors should be aware of a decrease in hedge fund interest recently. VTR was in 25 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with VTR holdings at the end of the previous quarter. Our calculations also showed that VTR 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.

To most traders, hedge funds are assumed to be worthless, old investment tools of years past. While there are more than 8000 funds in operation today, Our researchers look at the masters of this club, around 850 funds. These investment experts administer bulk of all hedge funds’ total capital, and by shadowing their best equity investments, Insider Monkey has uncovered a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced 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 .

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. 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 view the key hedge fund action surrounding Ventas, Inc. (NYSE:VTR).

What does smart money think about Ventas, Inc. (NYSE:VTR)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in VTR a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is VTR A Good Stock To Buy?

More specifically, Camber Capital Management was the largest shareholder of Ventas, Inc. (NYSE:VTR), with a stake worth $87.1 million reported as of the end of September. Trailing Camber Capital Management was Renaissance Technologies, which amassed a stake valued at $73.2 million. Eminence Capital, D E Shaw, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Ventas, Inc. (NYSE:VTR), around 5.2% of its 13F portfolio. Eminence Capital is also relatively very bullish on the stock, setting aside 0.78 percent of its 13F equity portfolio to VTR.

Because Ventas, Inc. (NYSE:VTR) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few hedge funds who were dropping their full holdings in the first quarter. Intriguingly, John Khoury’s Long Pond Capital sold off the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $239.5 million in stock. Greg Poole’s fund, Echo Street Capital Management, also sold off its stock, about $30.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ventas, Inc. (NYSE:VTR) but similarly valued. These stocks are Godaddy Inc (NYSE:GDDY), CBOE Global Markets Inc (NASDAQ:CBOE), Essential Utilities Inc (NYSE:WTRG), and Zebra Technologies Corporation (NASDAQ:ZBRA). All of these stocks’ market caps resemble VTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GDDY 54 2247882 3
CBOE 38 780569 11
WTRG 23 518741 2
ZBRA 28 576010 -6
Average 35.75 1030801 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1031 million. That figure was $337 million in VTR’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 23 bullish hedge fund positions. Ventas, Inc. (NYSE:VTR) is not the least popular stock in this group but hedge fund interest is still below 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on VTR as the stock returned 38.3% during the second quarter and outperformed the market by an even larger margin.

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