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Hedge Funds Are Betting On Essex Property Trust Inc (ESS)

Does Essex Property Trust Inc (NYSE:ESS) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Essex Property Trust Inc (NYSE:ESS) was in 19 hedge funds’ portfolios at the end of the second quarter of 2019. ESS investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 16 hedge funds in our database with ESS positions at the end of the previous quarter. Our calculations also showed that ESS isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

ESS_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the latest hedge fund action regarding Essex Property Trust Inc (NYSE:ESS).

Hedge fund activity in Essex Property Trust Inc (NYSE:ESS)

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in ESS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Phill Gross, Adage Capital Management

Among these funds, Renaissance Technologies held the most valuable stake in Essex Property Trust Inc (NYSE:ESS), which was worth $256.4 million at the end of the second quarter. On the second spot was AEW Capital Management which amassed $137.1 million worth of shares. Moreover, Adage Capital Management, Waterfront Capital Partners, and Citadel Investment Group were also bullish on Essex Property Trust Inc (NYSE:ESS), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, some big names have jumped into Essex Property Trust Inc (NYSE:ESS) headfirst. Waterfront Capital Partners, managed by Eduardo Abush, created the most outsized position in Essex Property Trust Inc (NYSE:ESS). Waterfront Capital Partners had $21.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $4.4 million position during the quarter. The other funds with brand new ESS positions are Matthew Tewksbury’s Stevens Capital Management, Jeffrey Talpins’s Element Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now review hedge fund activity in other stocks similar to Essex Property Trust Inc (NYSE:ESS). We will take a look at Match Group, Inc. (NASDAQ:MTCH), Ameriprise Financial, Inc. (NYSE:AMP), ORIX Corporation (NYSE:IX), and KLA Corporation (NASDAQ:KLAC). This group of stocks’ market valuations resemble ESS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTCH 31 787531 7
AMP 39 961087 5
IX 6 12820 0
KLAC 24 504403 -17
Average 25 566460 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $566 million. That figure was $508 million in ESS’s case. Ameriprise Financial, Inc. (NYSE:AMP) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 bullish hedge fund positions. Essex Property Trust Inc (NYSE:ESS) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ESS as the stock returned 12.6% during the same time frame and outperformed the market by an even larger margin.

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

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