Investors which have thoroughly done their homework, are in the game for the long haul, and have great conviction in their ideas are more commonly referred to as value investors. Warren Buffett is one of the most accomplished money managers in this niche. In order to apprise our readers of opportunities that could result in hefty returns over the long term, we set out to find an industry that hasn’t been performing well as of late, but which has companies within its which have robust business models that could survive this cyclical trend, a characteristic which also makes them a popular choice among hedge funds. What we honed in on is the real estate operations industry, which has slid by about 22% over the past 12 months. Let’s take a look at the top five equities in this sector that hedge funds are betting big on, which could suggest they are the most likely to lead a sector revival when it materializes.
At Insider Monkey, we track more than 785 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details here).
#5 Seritage Growth Properties (NYSE:SRG)
– Investors with Long Positions (as of December 31): 24
– Aggregate Value of Investors’ Holdings (as of December 31): $481.87 Million
During the fourth quarter, the number of hedgies in our database that were long Seritage Growth Properties (NYSE:SRG) increased by one, while the aggregate value of their holdings in the stock rose by 2.5%. The New York-based REIT’s stock has been on fire, appreciating by more than 15% so far this year. Established in 2015 by Sears Holdings Corp (NASDAQ:SHLD), Seritage’s main business plan is to create value from legacy Sears and Kmart real estate holdings and the company’s financial results for the fourth quarter reveal that it has been quite successful in that so far. Quarterly revenue came in at $59.5 million while FFO stood at $0.59. D E Shaw, founded by billionaire David Shaw, held about 518,000 shares of Seritage Growth Properties (NYSE:SRG) at the end of the fourth quarter.
#4 CBRE Group Inc (NYSE:CBG)
– Investors with Long Positions (as of December 31): 30
– Aggregate Value of Investors’ Holdings (as of December 31): $1.60 Billion
The number of hedge funds holding CBRE Group Inc (NYSE:CBG) in their portfolios dropped by two during the October-to-December period, while the aggregate value of these investments dropped by 4.2%. The stock price of the $9.44 billion commercial real estate services and investment firm is down by more than 21% in the last 12 months, in-line with the sector’s decline. The world’s largest property services company for the fifth consecutive year according to Real Capital Analytics (RCA), CBRE Group is seeking to expand its business in Japan, which is why it will double its headcount in the country to ten people for the next several years. Jeffrey Ubben‘s ValueAct Capital holds about 31.32 million shares of CBRE Group Inc (NYSE:CBG).
The top three real estate services companies to consider going long on are discussed on the next page.