Hedge Funds Are Buying SL Green Realty Corp (SLG)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of SL Green Realty Corp (NYSE:SLG). Stephen Lawrence Green founded SLG in 1980 and turned it into one of the biggest office building owners in Manhattan. Stephen Green didn’t make our list of the 10 most successful real estate billionaires in America though. SL Green Realty is a top 10 holding in Invesco S&P 500 Equal Weight Real Estate ETF (NYSE:EWRE).

SL Green Realty Corp (NYSE:SLG) has experienced an increase in hedge fund sentiment of late. SLG was in 24 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with SLG holdings at the end of the previous quarter. Our calculations also showed that SLG 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 market participants, hedge funds are assumed to be slow, old investment tools of the past. While there are more than 8000 funds trading at the moment, We choose to focus on the leaders of this club, about 750 funds. Most estimates calculate that this group of people orchestrate the majority of all hedge funds’ total capital, and by paying attention to their inimitable picks, Insider Monkey has determined several investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum 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 .

David Harding

David Harding of Winton Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the key hedge fund action regarding SL Green Realty Corp (NYSE:SLG).

What have hedge funds been doing with SL Green Realty Corp (NYSE:SLG)?

Heading into the fourth quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in SLG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SLG Positions

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in SL Green Realty Corp (NYSE:SLG), worth close to $129.6 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by John Khoury of Long Pond Capital, with a $95.4 million position; 2.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions include John Murphy’s Levin Easterly Partners, Ken Griffin’s Citadel Investment Group and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to SL Green Realty Corp (NYSE:SLG), around 2.49% of its portfolio. Levin Easterly Partners is also relatively very bullish on the stock, designating 1.68 percent of its 13F equity portfolio to SLG.

Consequently, some big names have been driving this bullishness. Levin Easterly Partners, managed by John Murphy, assembled the most outsized position in SL Green Realty Corp (NYSE:SLG). Levin Easterly Partners had $59.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $3.4 million position during the quarter. The other funds with brand new SLG positions are Matthew Tewksbury’s Stevens Capital Management, Donald Sussman’s Paloma Partners, and Steve Cohen’s Point72 Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SL Green Realty Corp (NYSE:SLG) but similarly valued. We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), LATAM Airlines Group S.A. (NYSE:LTM), Monolithic Power Systems, Inc. (NASDAQ:MPWR), and CubeSmart (NYSE:CUBE). All of these stocks’ market caps are closest to SLG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPLA 34 1015258 3
LTM 9 28716 4
MPWR 22 192922 -1
CUBE 23 308978 5
Average 22 386469 2.75

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 $386 million. That figure was $441 million in SLG’s case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 9 bullish hedge fund positions. SL Green Realty Corp (NYSE:SLG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 SLG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SLG were disappointed as the stock returned 4.4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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