Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Alexandria Real Estate Equities Inc (NYSE:ARE) was in 18 hedge funds’ portfolios at the end of September. ARE investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 23 hedge funds in our database with ARE holdings at the end of the previous quarter. Our calculations also showed that are isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to go over the recent hedge fund action surrounding Alexandria Real Estate Equities Inc (NYSE:ARE).
How are hedge funds trading Alexandria Real Estate Equities Inc (NYSE:ARE)?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ARE over the last 13 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.
The largest stake in Alexandria Real Estate Equities Inc (NYSE:ARE) was held by Balyasny Asset Management, which reported holding $90.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $78.4 million position. Other investors bullish on the company included Millennium Management, Echo Street Capital Management, and Carlson Capital.
Since Alexandria Real Estate Equities Inc (NYSE:ARE) has faced falling interest from the smart money, we can see that there were a few hedgies who were dropping their full holdings in the third quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, worth close to $9.7 million in stock, and Ken Heebner’s Capital Growth Management was right behind this move, as the fund cut about $5 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Alexandria Real Estate Equities Inc (NYSE:ARE). These stocks are Conagra Brands, Inc. (NYSE:CAG), Rollins, Inc. (NYSE:ROL), Wayfair Inc (NYSE:W), and Garmin Ltd. (NASDAQ:GRMN). This group of stocks’ market valuations are similar to ARE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAG | 38 | 1060012 | 7 |
| ROL | 17 | 287432 | 1 |
| W | 30 | 1549111 | 0 |
| GRMN | 27 | 306746 | 2 |
| Average | 28 | 800825 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $801 million. That figure was $354 million in ARE’s case. Conagra Brands, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 17 bullish hedge fund positions. Alexandria Real Estate Equities Inc (NYSE:ARE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CAG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
