Do Hedge Funds Love First Industrial Realty Trust, Inc. (FR)?

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to First Industrial Realty Trust, Inc. (NYSE:FR) changed recently.

Is First Industrial Realty Trust, Inc. (NYSE:FR) a buy here? Hedge funds are taking a bearish view. The number of long hedge fund bets were trimmed by 2 in recent months. Our calculations also showed that FR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are many signals market participants employ to evaluate stocks. Some of the most useful signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the market by a very impressive margin (see the details here).

Martin Whitman Third Avenue Management Marty Whitman

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the key hedge fund action encompassing First Industrial Realty Trust, Inc. (NYSE:FR).

How are hedge funds trading First Industrial Realty Trust, Inc. (NYSE:FR)?

Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in FR over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in First Industrial Realty Trust, Inc. (NYSE:FR) was held by Renaissance Technologies, which reported holding $73.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $39.5 million position. Other investors bullish on the company included Waterfront Capital Partners, Third Avenue Management, and Carlson Capital. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to First Industrial Realty Trust, Inc. (NYSE:FR), around 4.9% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 2.42 percent of its 13F equity portfolio to FR.

Due to the fact that First Industrial Realty Trust, Inc. (NYSE:FR) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few money managers who were dropping their full holdings heading into Q4. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $2.6 million in stock. Robert Jaffe’s fund, Force Capital, also said goodbye to its stock, about $0.9 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to First Industrial Realty Trust, Inc. (NYSE:FR). These stocks are PS Business Parks Inc (NYSE:PSB), OneMain Holdings Inc (NYSE:OMF), Wyndham Hotels & Resorts, Inc. (NYSE:WH), and Hawaiian Electric Industries, Inc. (NYSE:HE). This group of stocks’ market valuations are similar to FR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSB 17 60032 3
OMF 26 398536 -1
WH 36 800953 -4
HE 14 189464 -3
Average 23.25 362246 -1.25

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 $362 million. That figure was $241 million in FR’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 14 bullish hedge fund positions. First Industrial Realty Trust, Inc. (NYSE:FR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on FR, though not to the same extent, as the stock returned 7.6% during the first two months of the fourth quarter and outperformed the market.

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