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Hedge Funds Have Never Been This Bullish On CareTrust REIT Inc (CTRE)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like CareTrust REIT Inc (NASDAQ:CTRE).

Is CareTrust REIT Inc (NASDAQ:CTRE) a buy, sell, or hold? Prominent investors are getting more bullish. The number of bullish hedge fund positions improved by 4 in recent months. Our calculations also showed that CTRE isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a multitude of methods market participants put to use to analyze their stock investments. Two of the most under-the-radar methods are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outclass the S&P 500 by a significant margin (see the details here).

CTRE_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the recent hedge fund action encompassing CareTrust REIT Inc (NASDAQ:CTRE).

What does smart money think about CareTrust REIT Inc (NASDAQ:CTRE)?

At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CTRE over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Clint Carlson, Carlson Capital

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the number one position in CareTrust REIT Inc (NASDAQ:CTRE), worth close to $40.5 million, corresponding to 0.1% of its total 13F portfolio. On Millennium Management’s heels is Jeffrey Furber of AEW Capital Management, with a $28.1 million position; 0.9% of its 13F portfolio is allocated to the stock. Other peers with similar optimism comprise Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Clint Carlson’s Carlson Capital.

As aggregate interest increased, some big names have jumped into CareTrust REIT Inc (NASDAQ:CTRE) headfirst. Gillson Capital, managed by Daniel Johnson, established the most valuable position in CareTrust REIT Inc (NASDAQ:CTRE). Gillson Capital had $3.3 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $2.9 million position during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Minhua Zhang’s Weld Capital Management, and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks similar to CareTrust REIT Inc (NASDAQ:CTRE). These stocks are Pattern Energy Group Inc (NASDAQ:PEGI), Qudian Inc. (NYSE:QD), Appian Corporation (NASDAQ:APPN), and Atlantica Yield plc (NASDAQ:AY). This group of stocks’ market values are similar to CTRE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PEGI 12 35680 2
QD 22 170536 4
APPN 12 335900 -7
AY 18 203361 -3
Average 16 186369 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $128 million in CTRE’s case. Qudian Inc. (NYSE:QD) is the most popular stock in this table. On the other hand Pattern Energy Group Inc (NASDAQ:PEGI) is the least popular one with only 12 bullish hedge fund positions. CareTrust REIT Inc (NASDAQ:CTRE) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CTRE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTRE were disappointed as the stock returned -0.2% during 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 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.

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