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Hedge Funds Aren’t Done Buying Innovative Industrial Properties, Inc. (IIPR)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Innovative Industrial Properties, Inc. (NYSE:IIPR) in this article.

Is Innovative Industrial Properties, Inc. (NYSE:IIPR) an attractive stock to buy now? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund bets improved by 5 recently. Our calculations also showed that IIPR 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CAPITAL GROWTH MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the new hedge fund action encompassing Innovative Industrial Properties, Inc. (NYSE:IIPR).

How have hedgies been trading Innovative Industrial Properties, Inc. (NYSE:IIPR)?

Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IIPR over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is IIPR A Good Stock To Buy?

More specifically, Capital Growth Management was the largest shareholder of Innovative Industrial Properties, Inc. (NYSE:IIPR), with a stake worth $32.8 million reported as of the end of September. Trailing Capital Growth Management was Balyasny Asset Management, which amassed a stake valued at $4.6 million. D E Shaw, Springbok Capital, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to Innovative Industrial Properties, Inc. (NYSE:IIPR), around 2.51% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to IIPR.

As one would reasonably expect, some big names have jumped into Innovative Industrial Properties, Inc. (NYSE:IIPR) headfirst. Capital Growth Management, managed by Ken Heebner, created the largest position in Innovative Industrial Properties, Inc. (NYSE:IIPR). Capital Growth Management had $32.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $4.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Innovative Industrial Properties, Inc. (NYSE:IIPR). These stocks are M/I Homes Inc (NYSE:MHO), CSW Industrials, Inc. (NASDAQ:CSWI), Addus Homecare Corporation (NASDAQ:ADUS), and Talend S.A. (NASDAQ:TLND). This group of stocks’ market values are closest to IIPR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MHO 18 63238 8
CSWI 19 53910 0
ADUS 23 158689 6
TLND 28 421421 4
Average 22 174315 4.5

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 $174 million. That figure was $51 million in IIPR’s case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand M/I Homes Inc (NYSE:MHO) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Innovative Industrial Properties, Inc. (NYSE:IIPR) is even less popular than MHO. Hedge funds dodged a bullet by taking a bearish stance towards IIPR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IIPR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IIPR investors were disappointed as the stock returned -16.2% 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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