Hedge Funds Have Never Been This Bullish On Bluerock Residential Growth REIT Inc (BRG)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Bluerock Residential Growth REIT Inc (NYSE:BRG).

Is Bluerock Residential Growth REIT Inc (NYSE:BRG) a bargain? Money managers are in an optimistic mood. The number of bullish hedge fund positions rose by 2 lately. Our calculations also showed that BRG 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.

James Dondero Highland Capital Management

James Dondero of Highland Capital 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. We’re going to view the recent hedge fund action encompassing Bluerock Residential Growth REIT Inc (NYSE:BRG).

How are hedge funds trading Bluerock Residential Growth REIT Inc (NYSE:BRG)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in BRG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Bluerock Residential Growth REIT Inc (NYSE:BRG), which was worth $13.7 million at the end of the third quarter. On the second spot was Highland Capital Management which amassed $2.8 million worth of shares. Arrowstreet Capital, Springbok Capital, 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 Highland Capital Management allocated the biggest weight to Bluerock Residential Growth REIT Inc (NYSE:BRG), around 0.17% of its 13F portfolio. Springbok Capital is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to BRG.

As aggregate interest increased, key hedge funds have jumped into Bluerock Residential Growth REIT Inc (NYSE:BRG) headfirst. AQR Capital Management, managed by Cliff Asness, created the biggest position in Bluerock Residential Growth REIT Inc (NYSE:BRG). AQR Capital Management had $0.2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $0.1 million position during the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Bluerock Residential Growth REIT Inc (NYSE:BRG) but similarly valued. These stocks are Jumei International Holding Ltd (NYSE:JMEI), ChannelAdvisor Corp (NYSE:ECOM), National Bankshares Inc. (NASDAQ:NKSH), and Catasys, Inc. (NASDAQ:CATS). All of these stocks’ market caps are similar to BRG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JMEI 3 8671 -3
ECOM 13 46926 -1
NKSH 2 21129 -1
CATS 7 2325 1
Average 6.25 19763 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $26 million in BRG’s case. ChannelAdvisor Corp (NYSE:ECOM) is the most popular stock in this table. On the other hand National Bankshares Inc. (NASDAQ:NKSH) is the least popular one with only 2 bullish hedge fund positions. Bluerock Residential Growth REIT Inc (NYSE:BRG) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BRG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BRG were disappointed as the stock returned 4.2% 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 many of these stocks already outperformed the market so far this year.

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