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Hedge Funds Souring On Mack Cali Realty Corp (CLI)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Mack Cali Realty Corp (NYSE:CLI) based on that data and determine whether they were really smart about the stock.

Is Mack Cali Realty Corp (NYSE:CLI) an outstanding investment now? Money managers were taking a bearish view. The number of long hedge fund bets went down by 5 in recent months. Our calculations also showed that CLI 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Alan Reid Forward Management

J. Alan Reid, Jr. of Forward Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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 analyze the key hedge fund action encompassing Mack Cali Realty Corp (NYSE:CLI).

What does smart money think about Mack Cali Realty Corp (NYSE:CLI)?

At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLI 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.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Mack Cali Realty Corp (NYSE:CLI). Renaissance Technologies has a $57.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Barington Capital Group, managed by James A. Mitarotonda, which holds a $3.6 million position; 8.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Ken Fisher’s Fisher Asset Management, J. Alan Reid, Jr.’s Forward Management and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Mack Cali Realty Corp (NYSE:CLI), around 8.43% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, earmarking 0.67 percent of its 13F equity portfolio to CLI.

Judging by the fact that Mack Cali Realty Corp (NYSE:CLI) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $13.1 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dumped about $3 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Mack Cali Realty Corp (NYSE:CLI). These stocks are Meritage Homes Corp (NYSE:MTH), Hilltop Holdings Inc. (NYSE:HTH), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), and CSG Systems International, Inc. (NASDAQ:CSGS). This group of stocks’ market valuations are closest to CLI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTH 22 155253 -7
HTH 15 58772 -4
SAIL 21 204302 -4
CSGS 19 170275 -4
Average 19.25 147151 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $74 million in CLI’s case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Hilltop Holdings Inc. (NYSE:HTH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Mack Cali Realty Corp (NYSE:CLI) is even less popular than HTH. Hedge funds dodged a bullet by taking a bearish stance towards CLI. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately CLI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CLI investors were disappointed as the stock returned 1.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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