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Hedge Funds Are Selling Equity Commonwealth (EQC)

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Equity Commonwealth (NYSE:EQC) and see how it was affected.

Is Equity Commonwealth (NYSE:EQC) a sound investment right now? The smart money is taking a pessimistic view. The number of bullish hedge fund positions fell by 7 recently. Our calculations also showed that EQC isn’t among the 30 most popular stocks among hedge funds. EQC was in 17 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with EQC holdings at the end of the previous quarter.

According to most traders, hedge funds are viewed as slow, outdated investment tools of years past. While there are greater than 8,000 funds trading at the moment, We look at the top tier of this club, around 700 funds. It is estimated that this group of investors handle most of all hedge funds’ total asset base, and by paying attention to their top equity investments, Insider Monkey has figured out a number of investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

RENAISSANCE TECHNOLOGIES

Let’s go over the fresh hedge fund action encompassing Equity Commonwealth (NYSE:EQC).

Hedge fund activity in Equity Commonwealth (NYSE:EQC)

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the second quarter of 2018. On the other hand, there were a total of 24 hedge funds with a bullish position in EQC at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

EQC_dec2018

The largest stake in Equity Commonwealth (NYSE:EQC) was held by Renaissance Technologies, which reported holding $79.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $52.3 million position. Other investors bullish on the company included Hudson Way Capital Management, Governors Lane, and D E Shaw.

Because Equity Commonwealth (NYSE:EQC) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that slashed their full holdings in the third quarter. It’s worth mentioning that Nathaniel August’s Mangrove Partners dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $52.9 million in stock. Howard Guberman’s fund, Gruss Asset Management, also sold off its stock, about $23.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Equity Commonwealth (NYSE:EQC). We will take a look at Mellanox Technologies, Ltd. (NASDAQ:MLNX), Immunomedics, Inc. (NASDAQ:IMMU), Virtu Financial Inc (NASDAQ:VIRT), and Hawaiian Electric Industries, Inc. (NYSE:HE). This group of stocks’ market valuations are similar to EQC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MLNX 32 846212 -4
IMMU 30 944645 -3
VIRT 14 72947 -6
HE 11 117755 1
Average 21.75 495390 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $495 million. That figure was $297 million in EQC’s case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 11 bullish hedge fund positions. Equity Commonwealth (NYSE:EQC) 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. In this regard MLNX might be a better candidate to consider a long position.

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

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