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Hedge Funds Souring On QTS Realty Trust Inc (QTS)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of QTS Realty Trust Inc (NYSE:QTS).

QTS Realty Trust Inc (NYSE:QTS) has experienced a decrease in hedge fund sentiment in recent months. QTS was in 21 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with QTS positions at the end of the previous quarter. Our calculations also showed that QTS 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.

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the fresh hedge fund action surrounding QTS Realty Trust Inc (NYSE:QTS).

What does smart money think about QTS Realty Trust Inc (NYSE:QTS)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in QTS over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in QTS Realty Trust Inc (NYSE:QTS) was held by Zimmer Partners, which reported holding $111.2 million worth of stock at the end of September. It was followed by V3 Capital with a $63.1 million position. Other investors bullish on the company included Hudson Bay Capital Management, Land & Buildings Investment Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position V3 Capital allocated the biggest weight to QTS Realty Trust Inc (NYSE:QTS), around 13.8% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, dishing out 13.1 percent of its 13F equity portfolio to QTS.

Due to the fact that QTS Realty Trust Inc (NYSE:QTS) has faced bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their full holdings heading into Q4. At the top of the heap, Jeffrey Hinkle’s Shoals Capital Management dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $6.5 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund dropped about $5.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to QTS Realty Trust Inc (NYSE:QTS). We will take a look at Stag Industrial Inc (NYSE:STAG), Grupo Televisa SAB (NYSE:TV), Mirati Therapeutics, Inc. (NASDAQ:MRTX), and Cabot Microelectronics Corporation (NASDAQ:CCMP). This group of stocks’ market caps are closest to QTS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STAG 15 79203 -3
TV 19 481852 0
MRTX 33 1122981 1
CCMP 16 232320 -8
Average 20.75 479089 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $479 million. That figure was $366 million in QTS’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 15 bullish hedge fund positions. QTS Realty Trust Inc (NYSE:QTS) 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 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately QTS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on QTS were disappointed as the stock returned 10.7% during the same time period 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 many of these stocks already outperformed the market so far this year.

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