How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Vornado Realty Trust (NYSE:VNO).
Is Vornado Realty Trust (NYSE:VNO) the right pick for your portfolio? Investors who are in the know are buying. The number of long hedge fund bets rose by 7 recently. Our calculations also showed that VNO isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We’re going to take a look at the recent hedge fund action regarding Vornado Realty Trust (NYSE:VNO).
What does the smart money think about Vornado Realty Trust (NYSE:VNO)?
Heading into the second quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in VNO a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Long Pond Capital, managed by John Khoury, holds the number one position in Vornado Realty Trust (NYSE:VNO). Long Pond Capital has a $186.4 million position in the stock, comprising 6.5% of its 13F portfolio. The second largest stake is held by Elliott Management, managed by Paul Singer, which holds a $47.2 million call position; 0.3% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism encompass Israel Englander’s Millennium Management, Paul Singer’s Elliott Management and Jeffrey Furber’s AEW Capital Management.
Consequently, key hedge funds were leading the bulls’ herd. Elliott Management, managed by Paul Singer, created the biggest call position in Vornado Realty Trust (NYSE:VNO). Elliott Management had $47.2 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $20 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Michael Gelband’s ExodusPoint Capital, and D. E. Shaw’s D E Shaw.
Let’s go over hedge fund activity in other stocks similar to Vornado Realty Trust (NYSE:VNO). These stocks are Wynn Resorts, Limited (NASDAQ:WYNN), Tiffany & Co. (NYSE:TIF), UDR, Inc. (NYSE:UDR), and Invitation Homes Inc. (NYSE:INVH). This group of stocks’ market values match VNO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WYNN | 44 | 2204934 | -2 |
| TIF | 30 | 1663436 | 0 |
| UDR | 18 | 682485 | -2 |
| INVH | 24 | 425523 | 8 |
| Average | 29 | 1244095 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1244 million. That figure was $475 million in VNO’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 18 bullish hedge fund positions. Vornado Realty Trust (NYSE:VNO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on VNO, though not to the same extent, as the stock returned -0.5% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
