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Hedge Fund Favorites vs. Extra Space Storage, Inc. (EXR) In 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Extra Space Storage, Inc. (NYSE:EXR).

Extra Space Storage, Inc. (NYSE:EXR) was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. EXR has experienced an increase in support from the world’s most elite money managers of late. There were 20 hedge funds in our database with EXR holdings at the end of the previous quarter. Our calculations also showed that EXR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let’s check out the key hedge fund action encompassing Extra Space Storage, Inc. (NYSE:EXR).

What have hedge funds been doing with Extra Space Storage, Inc. (NYSE:EXR)?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EXR over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Extra Space Storage, Inc. (NYSE:EXR) was held by Millennium Management, which reported holding $88.3 million worth of stock at the end of September. It was followed by Marshall Wace with a $42.9 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Extra Space Storage, Inc. (NYSE:EXR), around 0.91% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to EXR.

As one would reasonably expect, specific money managers were breaking ground themselves. Marshall Wace, managed by Paul Marshall and Ian Wace, created the largest position in Extra Space Storage, Inc. (NYSE:EXR). Marshall Wace had $42.9 million invested in the company at the end of the quarter. Stuart J. Zimmer’s Zimmer Partners also initiated a $11.7 million position during the quarter. The other funds with new positions in the stock are Eduardo Abush’s Waterfront Capital Partners, Daniel Johnson’s Gillson Capital, and Benjamin A. Smith’s Laurion Capital Management.

Let’s check out hedge fund activity in other stocks similar to Extra Space Storage, Inc. (NYSE:EXR). These stocks are Hasbro, Inc. (NASDAQ:HAS), Akamai Technologies, Inc. (NASDAQ:AKAM), Twilio Inc. (NYSE:TWLO), and Conagra Brands, Inc. (NYSE:CAG). This group of stocks’ market values are similar to EXR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HAS 29 431855 5
AKAM 27 810658 -6
TWLO 59 2259864 -4
CAG 27 681948 3
Average 35.5 1046081 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1046 million. That figure was $329 million in EXR’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Akamai Technologies, Inc. (NASDAQ:AKAM) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Extra Space Storage, Inc. (NYSE:EXR) is even less popular than AKAM. Hedge funds dodged a bullet by taking a bearish stance towards EXR. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately EXR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EXR investors were disappointed as the stock returned 20.7% in 2019 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 65 percent of these stocks outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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