Hedge Funds Are Warming Up To SL Green Realty Corp (SLG)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of SL Green Realty Corp (NYSE:SLG) based on that data and determine whether they were really smart about the stock.

SL Green Realty Corp (NYSE:SLG) has experienced an increase in hedge fund sentiment lately. SL Green Realty Corp (NYSE:SLG) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. There were 23 hedge funds in our database with SLG holdings at the end of March. Our calculations also showed that SLG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Frank Brosens Taconic Capital

Frank Brosens of Taconic Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s take a look at the new hedge fund action surrounding SL Green Realty Corp (NYSE:SLG).

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

At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SLG over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in SL Green Realty Corp (NYSE:SLG) was held by King Street Capital, which reported holding $50.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $38.7 million position. Other investors bullish on the company included Arrowstreet Capital, Taconic Capital, and LDR Capital. In terms of the portfolio weights assigned to each position LDR Capital allocated the biggest weight to SL Green Realty Corp (NYSE:SLG), around 31.67% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, earmarking 6.86 percent of its 13F equity portfolio to SLG.

Consequently, key hedge funds were leading the bulls’ herd. King Street Capital, managed by Brian J. Higgins, created the most valuable position in SL Green Realty Corp (NYSE:SLG). King Street Capital had $50.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $33.3 million position during the quarter. The other funds with brand new SLG positions are Frank Brosens’s Taconic Capital, Stephen J. Errico’s Locust Wood Capital Advisers, and Alexander West’s Blue Pool Capital.

Let’s also examine 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 Cannae Holdings, Inc. (NYSE:CNNE), Cloudera, Inc. (NYSE:CLDR), Ballard Power Systems Inc. (NASDAQ:BLDP), Novanta Inc. (NASDAQ:NOVT), Portland General Electric Company (NYSE:POR), Perspecta Inc. (NYSE:PRSP), and BRP Inc. (NASDAQ:DOOO). This group of stocks’ market caps resemble SLG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNNE 43 596426 23
CLDR 33 855546 7
BLDP 16 76980 6
NOVT 18 103718 8
POR 21 164563 -2
PRSP 46 653988 14
DOOO 14 149741 4
Average 27.3 371566 8.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $259 million in SLG’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 14 bullish hedge fund positions. SL Green Realty Corp (NYSE:SLG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SLG is 53.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately SLG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SLG investors were disappointed as the stock returned -4.7% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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