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Hedge Funds Have Never Been This Bullish On Clipper Realty Inc. (CLPR)

In this article you are going to find out whether hedge funds think Clipper Realty Inc. (NYSE:CLPR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Clipper Realty Inc. (NYSE:CLPR) was in 9 hedge funds’ portfolios at the end of March. CLPR shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 8 hedge funds in our database with CLPR positions at the end of the previous quarter. Our calculations also showed that CLPR isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Alan Reid Forward Management

J. Alan Reid, Jr. of Forward Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the recent hedge fund action surrounding Clipper Realty Inc. (NYSE:CLPR).

Hedge fund activity in Clipper Realty Inc. (NYSE:CLPR)

Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CLPR over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Indaba Capital Management held the most valuable stake in Clipper Realty Inc. (NYSE:CLPR), which was worth $9 million at the end of the third quarter. On the second spot was Brigade Capital which amassed $5.5 million worth of shares. Forward Management, Renaissance Technologies, and Nut Tree Capital 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 Indaba Capital Management allocated the biggest weight to Clipper Realty Inc. (NYSE:CLPR), around 4.86% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, earmarking 0.98 percent of its 13F equity portfolio to CLPR.

As aggregate interest increased, specific money managers have jumped into Clipper Realty Inc. (NYSE:CLPR) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in Clipper Realty Inc. (NYSE:CLPR). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks similar to Clipper Realty Inc. (NYSE:CLPR). These stocks are Landmark Bancorp, Inc. (NASDAQ:LARK), Gran Tierra Energy Inc. (NYSE:GTE), LiveXLive Media, Inc. (NASDAQ:LIVX), and RYB Education, Inc. (NYSE:RYB). All of these stocks’ market caps are similar to CLPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LARK 3 3718 0
GTE 12 31824 -3
LIVX 3 5130 0
RYB 3 6156 -1
Average 5.25 11707 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $22 million in CLPR’s case. Gran Tierra Energy Inc. (NYSE:GTE) is the most popular stock in this table. On the other hand Landmark Bancorp, Inc. (NASDAQ:LARK) is the least popular one with only 3 bullish hedge fund positions. Clipper Realty Inc. (NYSE:CLPR) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on CLPR as the stock returned 43.2% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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