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Do Hedge Funds Really Like Welltower Inc. (WELL)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Welltower Inc. (NYSE:WELL) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Welltower Inc. (NYSE:WELL) a buy, sell, or hold? Hedge funds were taking a bullish view. The number of bullish hedge fund positions advanced by 2 in recent months. Welltower Inc. (NYSE:WELL) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WELL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 25 hedge funds in our database with WELL holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are several gauges stock traders can use to appraise publicly traded companies. Some of the most under-the-radar gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can trounce the broader indices by a very impressive amount (see the details here).

Ricky Sandler of Eminence Capital

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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to review the key hedge fund action regarding Welltower Inc. (NYSE:WELL).

How are hedge funds trading Welltower Inc. (NYSE:WELL)?

At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in WELL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Welltower Inc. (NYSE:WELL) was held by Zimmer Partners, which reported holding $216.1 million worth of stock at the end of September. It was followed by Elliott Investment Management with a $184.1 million position. Other investors bullish on the company included Long Pond Capital, Eminence Capital, and Elliott Investment Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Welltower Inc. (NYSE:WELL), around 2.93% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, setting aside 2.09 percent of its 13F equity portfolio to WELL.

As one would reasonably expect, key hedge funds were breaking ground themselves. Elliott Investment Management, managed by Paul Singer, established the biggest position in Welltower Inc. (NYSE:WELL). Elliott Investment Management had $184.1 million invested in the company at the end of the quarter. John Khoury’s Long Pond Capital also made a $52.9 million investment in the stock during the quarter. The other funds with brand new WELL positions are Ricky Sandler’s Eminence Capital, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Renaissance Technologies.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Welltower Inc. (NYSE:WELL) but similarly valued. These stocks are Sun Life Financial Inc. (NYSE:SLF), Stanley Black & Decker, Inc. (NYSE:SWK), Skyworks Solutions Inc (NASDAQ:SWKS), Trane Technologies plc (NYSE:TT), TELUS Corporation (NYSE:TU), FleetCor Technologies, Inc. (NYSE:FLT), and Aptiv PLC (NYSE:APTV). This group of stocks’ market valuations are closest to WELL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLF 14 85306 -2
SWK 33 807322 -3
SWKS 49 993689 20
TT 40 730073 4
TU 15 194956 0
FLT 53 2212169 2
APTV 43 1158307 10
Average 35.3 883117 4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $883 million. That figure was $655 million in WELL’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 14 bullish hedge fund positions. Welltower Inc. (NYSE:WELL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WELL is 53.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately WELL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WELL investors were disappointed as the stock returned 4% since Q2 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 in 2020.

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