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Hedge Funds Couldn’t Have Sold Highwoods Properties Inc (HIW) Faster

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Highwoods Properties Inc (NYSE:HIW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Highwoods Properties Inc (NYSE:HIW) investors should be aware of a decrease in enthusiasm from smart money in recent months. HIW was in 16 hedge funds’ portfolios at the end of December. There were 24 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 Q4 rankings and see the video at the end of this article for Q3 rankings).

At the moment there are a multitude of methods investors can use to analyze stocks. A duo of the most innovative methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outclass their index-focused peers by a significant margin (see the details here).

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the recent hedge fund action regarding Highwoods Properties Inc (NYSE:HIW).

What have hedge funds been doing with Highwoods Properties Inc (NYSE:HIW)?

At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in HIW a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HIW A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in Highwoods Properties Inc (NYSE:HIW). Renaissance Technologies has a $99.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $49.4 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism include David Harding’s Winton Capital Management, Daniel Johnson’s Gillson Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Highwoods Properties Inc (NYSE:HIW), around 0.92% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to HIW.

Since Highwoods Properties Inc (NYSE:HIW) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers that decided to sell off their positions entirely by the end of the third quarter. Interestingly, Greg Poole’s Echo Street Capital Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $12.2 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $6.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 8 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Highwoods Properties Inc (NYSE:HIW) but similarly valued. We will take a look at Nuance Communications Inc. (NASDAQ:NUAN), Rexford Industrial Realty Inc (NYSE:REXR), Cosan Limited (NYSE:CZZ), and Radian Group Inc (NYSE:RDN). 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
NUAN 39 966448 10
REXR 21 50480 2
CZZ 12 300249 -3
RDN 29 207932 5
Average 25.25 381277 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $381 million. That figure was $189 million in HIW’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 12 bullish hedge fund positions. Highwoods Properties Inc (NYSE:HIW) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately HIW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HIW investors were disappointed as the stock returned -32.5% during the same time period 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 most of these stocks already outperformed the market in Q1.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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