The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Highwoods Properties Inc (NYSE:HIW) based on those filings.
Highwoods Properties Inc (NYSE:HIW) was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. HIW has experienced a decrease in enthusiasm from smart money lately. There were 16 hedge funds in our database with HIW positions at the end of the previous quarter. Our calculations also showed that HIW isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 S&P 500 ETFs by more than 58 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 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 stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the latest hedge fund action surrounding Highwoods Properties Inc (NYSE:HIW).
How have hedgies been trading Highwoods Properties Inc (NYSE:HIW)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HIW over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Highwoods Properties Inc (NYSE:HIW), which was worth $35.8 million at the end of the third quarter. On the second spot was Millennium Management which amassed $21.9 million worth of shares. Balyasny Asset Management, Citadel Investment Group, and Gillson 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 Hill Winds Capital allocated the biggest weight to Highwoods Properties Inc (NYSE:HIW), around 7.05% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 1.32 percent of its 13F equity portfolio to HIW.
Since Highwoods Properties Inc (NYSE:HIW) has faced falling interest from the smart money, we can see that there lies a certain “tier” of money managers who sold off their positions entirely heading into Q4. Intriguingly, D. E. Shaw’s D E Shaw said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $2 million in stock. Thomas Bailard’s fund, Bailard Inc, also sold off its stock, about $0.7 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Highwoods Properties Inc (NYSE:HIW) but similarly valued. These stocks are Grand Canyon Education Inc (NASDAQ:LOPE), ServiceMaster Global Holdings Inc (NYSE:SERV), J2 Global Inc (NASDAQ:JCOM), and Inphi Corporation (NYSE:IPHI). All of these stocks’ market caps resemble HIW’s market cap.
|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 29 hedge funds with bullish positions and the average amount invested in these stocks was $370 million. That figure was $101 million in HIW’s case. Inphi Corporation (NYSE:IPHI) is the most popular stock in this table. On the other hand J2 Global Inc (NASDAQ:JCOM) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Highwoods Properties Inc (NYSE:HIW) is even less popular than JCOM. Hedge funds dodged a bullet by taking a bearish stance towards HIW. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately HIW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); HIW investors were disappointed as the stock returned 7.6% during the second quarter (through June 25th) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.