Hedge Funds Are Buying JBG SMITH Properties (JBGS)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 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 JBG SMITH Properties (NYSE:JBGS).

JBG SMITH Properties (NYSE:JBGS) shareholders have witnessed an increase in support from the world’s most elite money managers of late. JBGS was in 19 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with JBGS positions at the end of the previous quarter. Our calculations also showed that JBGS 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.

If you’d ask most shareholders, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the moguls of this club, approximately 750 funds. It is estimated that this group of investors direct bulk of the hedge fund industry’s total asset base, and by tracking their inimitable stock picks, Insider Monkey has discovered numerous investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. 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 already gained 20 percent. Keeping this in mind we’re going to take a gander at the new hedge fund action regarding JBG SMITH Properties (NYSE:JBGS).

Hedge fund activity in JBG SMITH Properties (NYSE:JBGS)

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in JBGS over the last 17 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Third Avenue Management was the largest shareholder of JBG SMITH Properties (NYSE:JBGS), with a stake worth $51.3 million reported as of the end of September. Trailing Third Avenue Management was Sessa Capital, which amassed a stake valued at $48.8 million. Long Pond Capital, Ulysses Management, and Zimmer Partners 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 One Tusk Investment Partners allocated the biggest weight to JBG SMITH Properties (NYSE:JBGS), around 11.48% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, earmarking 5.56 percent of its 13F equity portfolio to JBGS.

As industrywide interest jumped, some big names were breaking ground themselves. Paloma Partners, managed by Donald Sussman, established the most outsized position in JBG SMITH Properties (NYSE:JBGS). Paloma Partners had $0.9 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.4 million position during the quarter. The only other fund with a brand new JBGS position is John A. Levin’s Levin Capital Strategies.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as JBG SMITH Properties (NYSE:JBGS) but similarly valued. We will take a look at Cree, Inc. (NASDAQ:CREE), Dynatrace, Inc. (NYSE:DT), Enable Midstream Partners LP (NYSE:ENBL), and Popular Inc (NASDAQ:BPOP). This group of stocks’ market valuations resemble JBGS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CREE 22 357481 -2
DT 20 147275 20
ENBL 5 27783 -2
BPOP 29 752647 -1
Average 19 321297 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $235 million in JBGS’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 5 bullish hedge fund positions. JBG SMITH Properties (NYSE:JBGS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately JBGS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JBGS investors were disappointed as the stock returned 2.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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