How do we determine whether Postal Realty Trust, Inc. (NYSE:PSTL) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Postal Realty Trust, Inc. (NYSE:PSTL) was in 7 hedge funds’ portfolios at the end of the third quarter of 2019. PSTL has experienced a decrease in hedge fund interest in recent months. There were 9 hedge funds in our database with PSTL positions at the end of the previous quarter. Our calculations also showed that PSTL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
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 Postal Realty Trust, Inc. (NYSE:PSTL).
Hedge fund activity in Postal Realty Trust, Inc. (NYSE:PSTL)
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in PSTL a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in Postal Realty Trust, Inc. (NYSE:PSTL), worth close to $7 million, comprising 0.1% of its total 13F portfolio. Coming in second is Waterfront Capital Partners, managed by Eduardo Abush, which holds a $6.2 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other peers with similar optimism contain James Dondero’s Highland Capital Management, Frederick DiSanto’s Ancora Advisors and Adam Usdan’s Trellus Management Company. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Postal Realty Trust, Inc. (NYSE:PSTL), around 0.96% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, earmarking 0.35 percent of its 13F equity portfolio to PSTL.
Judging by the fact that Postal Realty Trust, Inc. (NYSE:PSTL) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who sold off their entire stakes heading into Q4. Intriguingly, Daniel Johnson’s Gillson Capital dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $0.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Postal Realty Trust, Inc. (NYSE:PSTL) but similarly valued. We will take a look at Iterum Therapeutics plc (NASDAQ:ITRM), Great Elm Capital Corporation (NASDAQ:GECC), Sequans Communications SA (NYSE:SQNS), and Idera Pharmaceuticals Inc (NASDAQ:IDRA). This group of stocks’ market caps resemble PSTL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITRM | 3 | 11366 | 0 |
| GECC | 3 | 1592 | -1 |
| SQNS | 4 | 14981 | 0 |
| IDRA | 8 | 18034 | 0 |
| Average | 4.5 | 11493 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $20 million in PSTL’s case. Idera Pharmaceuticals Inc (NASDAQ:IDRA) is the most popular stock in this table. On the other hand Iterum Therapeutics plc (NASDAQ:ITRM) is the least popular one with only 3 bullish hedge fund positions. Postal Realty Trust, Inc. (NYSE:PSTL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately PSTL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PSTL were disappointed as the stock returned 1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.