At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Federal Realty Investment Trust (NYSE:FRT) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Federal Realty Investment Trust (NYSE:FRT) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 26. FRT investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 24 hedge funds in our database with FRT holdings at the end of March. Our calculations also showed that FRT 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.
If you’d ask most shareholders, hedge funds are assumed to be unimportant, outdated financial tools of the past. While there are over 8000 funds in operation today, We look at the crème de la crème of this club, approximately 850 funds. These investment experts oversee the lion’s share of the hedge fund industry’s total capital, and by watching their top stock picks, Insider Monkey has figured out many investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Charles Davidson of Wexford Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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 fresh hedge fund action surrounding Federal Realty Investment Trust (NYSE:FRT).
What have hedge funds been doing with Federal Realty Investment Trust (NYSE:FRT)?
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in FRT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Federal Realty Investment Trust (NYSE:FRT), with a stake worth $27.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $13.3 million. Balyasny Asset Management, Adage Capital Management, and Citadel Investment Group 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 Wexford Capital allocated the biggest weight to Federal Realty Investment Trust (NYSE:FRT), around 0.31% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to FRT.
Since Federal Realty Investment Trust (NYSE:FRT) has experienced falling interest from hedge fund managers, logic holds that there is a sect of hedgies who were dropping their positions entirely by the end of the second quarter. Interestingly, Clint Carlson’s Carlson Capital said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising close to $16.7 million in stock, and Daniel Johnson’s Gillson Capital was right behind this move, as the fund dumped about $3.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Federal Realty Investment Trust (NYSE:FRT) but similarly valued. These stocks are Plains All American Pipeline, L.P. (NYSE:PAA), Amedisys Inc (NASDAQ:AMED), Penumbra Inc (NYSE:PEN), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), United Microelectronics Corp (NYSE:UMC), Cree, Inc. (NASDAQ:CREE), and Continental Resources, Inc. (NYSE:CLR). All of these stocks’ market caps are closest to FRT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAA | 9 | 65144 | 1 |
| AMED | 30 | 375114 | 10 |
| PEN | 20 | 263196 | 0 |
| OLLI | 24 | 179330 | 5 |
| UMC | 11 | 110335 | -4 |
| CREE | 17 | 597780 | 1 |
| CLR | 23 | 153030 | -3 |
| Average | 19.1 | 249133 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $76 million in FRT’s case. Amedisys Inc (NASDAQ:AMED) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 9 bullish hedge fund positions. Federal Realty Investment Trust (NYSE:FRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FRT is 24.1. 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 positive signal but 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately FRT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FRT were disappointed as the stock returned -12.7% in Q3 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 many of these stocks already outperformed the market so far this year.
Follow Federal Realty Investment Trust (NYSE:FRT)
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Disclosure: None. This article was originally published at Insider Monkey.
