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Hedge Funds Are Buying Eastgroup Properties Inc (EGP)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 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 Eastgroup Properties Inc (NYSE:EGP).

Is Eastgroup Properties Inc (NYSE:EGP) ready to rally soon? Money managers are taking a bullish view. The number of bullish hedge fund bets went up by 5 recently. Our calculations also showed that EGP isn’t among the 30 most popular stocks among hedge funds (view the video below). EGP was in 12 hedge funds’ portfolios at the end of the second quarter of 2019. There were 7 hedge funds in our database with EGP positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We’re going to go over the recent hedge fund action regarding Eastgroup Properties Inc (NYSE:EGP).

What have hedge funds been doing with Eastgroup Properties Inc (NYSE:EGP)?

At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 71% from the first quarter of 2019. On the other hand, there were a total of 8 hedge funds with a bullish position in EGP a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

EGP_oct2019

The largest stake in Eastgroup Properties Inc (NYSE:EGP) was held by Millennium Management, which reported holding $36.1 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $15.6 million position. Other investors bullish on the company included Balyasny Asset Management, Renaissance Technologies, and AQR Capital Management.

As aggregate interest increased, key money managers were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, assembled the biggest position in Eastgroup Properties Inc (NYSE:EGP). Laurion Capital Management had $1.7 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $1.5 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Bruce Kovner’s Caxton Associates LP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Eastgroup Properties Inc (NYSE:EGP) but similarly valued. We will take a look at Virtu Financial Inc (NASDAQ:VIRT), Teradata Corporation (NYSE:TDC), Echostar Corporation (NASDAQ:SATS), and Landstar System, Inc. (NASDAQ:LSTR). This group of stocks’ market values are closest to EGP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIRT 16 120585 -1
TDC 22 280507 2
SATS 28 563065 -1
LSTR 22 221384 -1
Average 22 296385 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $84 million in EGP’s case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand Virtu Financial Inc (NASDAQ:VIRT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Eastgroup Properties Inc (NYSE:EGP) is even less popular than VIRT. Hedge funds clearly dropped the ball on EGP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 EGP as the stock returned 8.4% during the third quarter and outperformed the market by an even larger margin.

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

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