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Hedge Funds Have Never Been This Bullish On American Assets Trust, Inc (AAT)

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 American Assets Trust, Inc (NYSE:AAT) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Is American Assets Trust, Inc (NYSE:AAT) a good investment right now? The smart money was getting more optimistic. The number of bullish hedge fund positions advanced by 5 in recent months. American Assets Trust, Inc (NYSE:AAT) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AAT 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). There were 15 hedge funds in our database with AAT holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most investors, hedge funds are seen as worthless, outdated financial tools of yesteryear. While there are over 8000 funds trading today, Our experts hone in on the crème de la crème of this group, approximately 850 funds. It is estimated that this group of investors handle the majority of the hedge fund industry’s total asset base, and by keeping track of their best stock picks, Insider Monkey has found a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated 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 .

Michael Gelband of ExodusPoint 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 peek at the fresh hedge fund action encompassing American Assets Trust, Inc (NYSE:AAT).

How are hedge funds trading American Assets Trust, Inc (NYSE:AAT)?

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AAT over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Marshall Wace LLP was the largest shareholder of American Assets Trust, Inc (NYSE:AAT), with a stake worth $6.2 million reported as of the end of September. Trailing Marshall Wace LLP was D E Shaw, which amassed a stake valued at $5.3 million. Citadel Investment Group, Millennium Management, and Winton Capital Management 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 Steel Canyon Capital allocated the biggest weight to American Assets Trust, Inc (NYSE:AAT), around 2.37% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.15 percent of its 13F equity portfolio to AAT.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Steel Canyon Capital, managed by Brett Huckelbridge, initiated the biggest position in American Assets Trust, Inc (NYSE:AAT). Steel Canyon Capital had $1.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new AAT investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Benjamin A. Smith’s Laurion Capital Management, and Donald Sussman’s Paloma Partners.

Let’s now review hedge fund activity in other stocks similar to American Assets Trust, Inc (NYSE:AAT). We will take a look at BEST Inc. (NYSE:BEST), Flagstar Bancorp Inc (NYSE:FBC), Yelp Inc (NYSE:YELP), Upwork Inc. (NASDAQ:UPWK), Verra Mobility Corporation (NASDAQ:VRRM), Hilton Grand Vacations Inc. (NYSE:HGV), and Hilltop Holdings Inc. (NYSE:HTH). This group of stocks’ market values match AAT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BEST 6 18518 0
FBC 15 105503 0
YELP 27 381420 2
UPWK 25 236015 3
VRRM 25 247110 2
HGV 30 554675 1
HTH 23 107835 8
Average 21.6 235868 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $35 million in AAT’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand BEST Inc. (NYSE:BEST) is the least popular one with only 6 bullish hedge fund positions. American Assets Trust, Inc (NYSE:AAT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AAT is 40. 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 negative signal and 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 surpassed the market by 19.3 percentage points. Unfortunately AAT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AAT investors were disappointed as the stock returned -12.6% in the third quarter 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 in 2020.

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