Ares Commercial Real Estate Corp (NYSE:ACRE) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months.
If you’d ask most traders, hedge funds are assumed to be underperforming, outdated financial tools of years past. While there are more than 8000 funds trading at present, we choose to focus on the crème de la crème of this club, close to 450 funds. Most estimates calculate that this group controls the majority of the hedge fund industry’s total asset base, and by tracking their top picks, we have uncovered a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).
Equally as key, positive insider trading sentiment is another way to parse down the marketplace. There are plenty of reasons for an insider to cut shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many empirical studies have demonstrated the valuable potential of this tactic if “monkeys” know where to look (learn more here).
With these “truths” under our belt, it’s important to take a peek at the recent action surrounding Ares Commercial Real Estate Corp (NYSE:ACRE).
How are hedge funds trading Ares Commercial Real Estate Corp (NYSE:ACRE)?
Heading into 2013, a total of 6 of the hedge funds we track were long in this stock, a change of -14% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly.
According to our comprehensive database, Dialectic Capital Management, managed by John Fichthorn, holds the most valuable position in Ares Commercial Real Estate Corp (NYSE:ACRE). Dialectic Capital Management has a $8.2 million position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include J. Alan Reid, Jr.’s Forward Management, Bruce Silver’s Silver Capital Management LLC and Gregory Fraser, Rudolph Kluiber, and Timothy Kroch’s GRT Capital Partners.
Judging by the fact that Ares Commercial Real Estate Corp (NYSE:ACRE) has faced bearish sentiment from the smart money, we can see that there was a specific group of hedge funds that elected to cut their entire stakes in Q4. Interestingly, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dumped the biggest investment of all the hedgies we track, totaling about $3.7 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund cut about $1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds in Q4.
What do corporate executives and insiders think about Ares Commercial Real Estate Corp (NYSE:ACRE)?
Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has experienced transactions within the past 180 days. Over the latest half-year time frame, Ares Commercial Real Estate Corp (NYSE:ACRE) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Ares Commercial Real Estate Corp (NYSE:ACRE). These stocks are Whitestone REIT (NYSE:WSR), Arbor Realty Trust, Inc. (NYSE:ABR), Gladstone Commercial Corporation (NASDAQ:GOOD), UMH Properties, Inc (NYSE:UMH), and Javelin Mortgage Investment Corp (NYSE:JMI). All of these stocks are in the reit – diversified industry and their market caps resemble ACRE’s market cap.