Equity Lifestyle Properties, Inc. (ELS): Are Hedge Funds Right About This Stock?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Equity Lifestyle Properties, Inc. (NYSE:ELS).

Equity Lifestyle Properties, Inc. (NYSE:ELS) was in 11 hedge funds’ portfolios at the end of September. ELS investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. There were 14 hedge funds in our database with ELS positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Oaktree Capital Group LLC (NYSE:OAK), Hyatt Hotels Corporation (NYSE:H), and American Financial Group (NYSE:AFG) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Equity Lifestyle Properties, Inc. (NYSE:ELS)?

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, down by 21% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards ELS over the last 5 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey,  D E Shaw, one of the largest hedge funds in the world,, holds the most valuable position in Equity Lifestyle Properties, Inc. (NYSE:ELS). D E Shaw has a $90.5 million position in the stock. Coming in second is  Jim Simons’ Renaissance Technologies, holding a $80.4 million position. Remaining peers that are bullish contain Jeffrey Furber’s AEW Capital Management, Murray Stahl’s Horizon Asset Management and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Because Equity Lifestyle Properties, Inc. (NYSE:ELS) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of funds that slashed their positions entirely heading into Q4. It’s worth mentioning that Richard Driehaus’ Driehaus Capital said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $7.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $5.5 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Equity Lifestyle Properties, Inc. (NYSE:ELS) but similarly valued. We will take a look at Oaktree Capital Group LLC (NYSE:OAK), Hyatt Hotels Corporation (NYSE:H), American Financial Group (NYSE:AFG), and AngloGold Ashanti Limited (ADR) (NYSE:AU). This group of stocks’ market values resemble ELS’s market value.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $271 million in ELS’s case. Hyatt Hotels Corporation (NYSE:H) is the most popular stock in this table. On the other hand Oaktree Capital Group LLC (NYSE:OAK) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Equity Lifestyle Properties, Inc. (NYSE:ELS) is even less popular than OAK. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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