Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Prologis Inc (NYSE:PLD) the right pick for your portfolio? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund positions decreased by 1 lately. Our calculations also showed that PLD isn’t among the 30 most popular stocks among hedge funds (see the video at the end of this article).
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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the latest hedge fund action encompassing Prologis Inc (NYSE:PLD).
Hedge fund activity in Prologis Inc (NYSE:PLD)
At Q2’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PLD over the last 16 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 Prologis Inc (NYSE:PLD) was held by AEW Capital Management, which reported holding $109.5 million worth of stock at the end of March. It was followed by AQR Capital Management with a $85.9 million position. Other investors bullish on the company included Adage Capital Management, Winton Capital Management, and Millennium Management.
Judging by the fact that Prologis Inc (NYSE:PLD) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that elected to cut their positions entirely last quarter. Intriguingly, Greg Poole’s Echo Street Capital Management dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $22.3 million in stock, and Eduardo Abush’s Waterfront Capital Partners was right behind this move, as the fund said goodbye to about $8.6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Prologis Inc (NYSE:PLD). We will take a look at Lloyds Banking Group PLC (NYSE:LYG), EOG Resources Inc (NYSE:EOG), Air Products and Chemicals, Inc. (NYSE:APD), and Simon Property Group, Inc (NYSE:SPG). All of these stocks’ market caps are similar to PLD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $670 million. That figure was $457 million in PLD’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 8 bullish hedge fund positions. Prologis Inc (NYSE:PLD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on PLD as the stock returned 7.1% during the same time frame and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.