Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Brookfield Property Partners LP (NASDAQ:BPY) changed recently.
Is Brookfield Property Partners LP (NASDAQ:BPY) a good investment right now? Money managers are betting on the stock. The number of bullish hedge fund bets improved by 8 lately. Our calculations also showed that BPY isn’t among the 30 most popular stocks among hedge funds. BPY was in 11 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with BPY positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the key hedge fund action surrounding Brookfield Property Partners LP (NASDAQ:BPY).
Hedge fund activity in Brookfield Property Partners LP (NASDAQ:BPY)
Heading into the fourth quarter of 2018, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 267% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in BPY at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Brookfield Property Partners LP (NASDAQ:BPY) was held by Marshall Wace LLP, which reported holding $46.7 million worth of stock at the end of September. It was followed by GLG Partners with a $40.4 million position. Other investors bullish on the company included Citadel Investment Group, Waratah Capital Advisors, and Renaissance Technologies.
Consequently, some big names have jumped into Brookfield Property Partners LP (NASDAQ:BPY) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Brookfield Property Partners LP (NASDAQ:BPY). Marshall Wace LLP had $46.7 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $40.4 million investment in the stock during the quarter. The other funds with brand new BPY positions are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Thomas Steyer’s Farallon Capital, and Andrew Hahn’s Ursa Fund Management.
Let’s also examine hedge fund activity in other stocks similar to Brookfield Property Partners LP (NASDAQ:BPY). These stocks are Black Knight, Inc. (NYSE:BKI), Wheaton Precious Metals Corp. (NYSE:WPM), Graco Inc. (NYSE:GGG), and Roku, Inc. (NASDAQ:ROKU). This group of stocks’ market values are closest to BPY’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $466 million. That figure was $136 million in BPY’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Wheaton Precious Metals Corp. (NYSE:WPM) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Brookfield Property Partners LP (NASDAQ:BPY) is even less popular than WPM. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.