Hedge Funds Have Never Been This Bullish On JBG SMITH Properties (JBGS)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought JBG SMITH Properties (NYSE:JBGS) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

JBG SMITH Properties (NYSE:JBGS) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. JBGS has experienced an increase in hedge fund interest lately. There were 20 hedge funds in our database with JBGS positions at the end of the first quarter. Our calculations also showed that JBGS 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.

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’ 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 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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Keeping this in mind we’re going to analyze the fresh hedge fund action encompassing JBG SMITH Properties (NYSE:JBGS).

What have hedge funds been doing with JBG SMITH Properties (NYSE:JBGS)?

At second quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JBGS over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Is JBGS A Good Stock To Buy?

More specifically, Long Pond Capital was the largest shareholder of JBG SMITH Properties (NYSE:JBGS), with a stake worth $104.7 million reported as of the end of September. Trailing Long Pond Capital was V3 Capital, which amassed a stake valued at $84.8 million. Third Avenue Management, Ulysses Management, and Renaissance Technologies 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 V3 Capital allocated the biggest weight to JBG SMITH Properties (NYSE:JBGS), around 19.57% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, dishing out 4.51 percent of its 13F equity portfolio to JBGS.

As industrywide interest jumped, some big names were leading the bulls’ herd. Wexford Capital, managed by Charles Davidson and Joseph Jacobs, initiated the biggest position in JBG SMITH Properties (NYSE:JBGS). Wexford Capital had $1.1 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $1 million position during the quarter. The other funds with brand new JBGS positions are Donald Sussman’s Paloma Partners, Thomas Bailard’s Bailard Inc, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as JBG SMITH Properties (NYSE:JBGS) but similarly valued. We will take a look at Eldorado Resorts Inc (NASDAQ:ERI), Hawaiian Electric Industries, Inc. (NYSE:HE), Envestnet Inc (NYSE:ENV), China Biologic Products Holdings Inc (NASDAQ:CBPO), Hanesbrands Inc. (NYSE:HBI), Natera Inc (NASDAQ:NTRA), and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). This group of stocks’ market values match JBGS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ERI 49 733973 10
HE 16 159237 3
ENV 19 85387 2
CBPO 23 774587 7
HBI 31 543895 -5
NTRA 35 634417 3
MNTA 42 733308 6
Average 30.7 523543 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $283 million in JBGS’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 16 bullish hedge fund positions. JBG SMITH Properties (NYSE:JBGS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JBGS is 53.6. 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately JBGS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); JBGS investors were disappointed as the stock returned -10.6% since Q2 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.