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Hedge Funds Are Betting On American Finance Trust, Inc. (AFIN)

Is American Finance Trust, Inc. (NASDAQ:AFIN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

American Finance Trust, Inc. (NASDAQ:AFIN) was in 8 hedge funds’ portfolios at the end of the third quarter of 2019. AFIN investors should pay attention to an increase in enthusiasm from smart money recently. There were 4 hedge funds in our database with AFIN positions at the end of the previous quarter. Our calculations also showed that AFIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

Jim Simons of Renaissance Technologies

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. We’re going to take a glance at the recent hedge fund action surrounding American Finance Trust, Inc. (NASDAQ:AFIN).

What have hedge funds been doing with American Finance Trust, Inc. (NASDAQ:AFIN)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in AFIN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AFIN A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of American Finance Trust, Inc. (NASDAQ:AFIN), with a stake worth $7.4 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $2.2 million. D E Shaw, Tudor Investment Corp, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to American Finance Trust, Inc. (NASDAQ:AFIN), around 0.03% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to AFIN.

Consequently, key money managers have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, established the largest position in American Finance Trust, Inc. (NASDAQ:AFIN). Tudor Investment Corp had $0.4 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.3 million position during the quarter. The other funds with brand new AFIN positions are Ken Griffin’s Citadel Investment Group and Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks similar to American Finance Trust, Inc. (NASDAQ:AFIN). We will take a look at Plantronics, Inc. (NYSE:PLT), Heron Therapeutics Inc (NASDAQ:HRTX), Gibraltar Industries Inc (NASDAQ:ROCK), and Denali Therapeutics Inc. (NASDAQ:DNLI). This group of stocks’ market valuations are closest to AFIN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLT 11 97331 -7
HRTX 15 372665 -3
ROCK 18 118518 8
DNLI 7 14082 -2
Average 12.75 150649 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $12 million in AFIN’s case. Gibraltar Industries Inc (NASDAQ:ROCK) is the most popular stock in this table. On the other hand Denali Therapeutics Inc. (NASDAQ:DNLI) is the least popular one with only 7 bullish hedge fund positions. American Finance Trust, Inc. (NASDAQ:AFIN) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on AFIN, though not to the same extent, as the stock returned 7.3% during the first two months of the fourth quarter and outperformed the market.

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

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