Here is What Hedge Funds Think About Equity Commonwealth (EQC)

In this article we will take a look at whether hedge funds think Equity Commonwealth (NYSE:EQC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Equity Commonwealth (NYSE:EQC) the right investment to pursue these days? Hedge funds are taking a bearish view. The number of long hedge fund bets were trimmed by 2 recently. Our calculations also showed that EQC 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). EQC was in 20 hedge funds’ portfolios at the end of March. There were 22 hedge funds in our database with EQC positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are assumed to be worthless, old investment vehicles of the past. While there are more than 8000 funds in operation at the moment, Our experts look at the bigwigs of this group, approximately 850 funds. It is estimated that this group of investors have their hands on most of the smart money’s total capital, and by tailing their first-class stock picks, Insider Monkey has found numerous investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Rogers Ariel Investments

John Rogers of Ariel Investments

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. With all of this in mind we’re going to go over the new hedge fund action regarding Equity Commonwealth (NYSE:EQC).

How are hedge funds trading Equity Commonwealth (NYSE:EQC)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in EQC a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in Equity Commonwealth (NYSE:EQC) was held by Citadel Investment Group, which reported holding $36.6 million worth of stock at the end of September. It was followed by Hudson Way Capital Management with a $35 million position. Other investors bullish on the company included Renaissance Technologies, Ariel Investments, and D E Shaw. In terms of the portfolio weights assigned to each position Hudson Way Capital Management allocated the biggest weight to Equity Commonwealth (NYSE:EQC), around 16.2% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to EQC.

Due to the fact that Equity Commonwealth (NYSE:EQC) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of funds that slashed their positions entirely in the first quarter. At the top of the heap, Jeffrey Bronchick’s Cove Street Capital cut the largest stake of all the hedgies followed by Insider Monkey, worth an estimated $14.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $12.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Equity Commonwealth (NYSE:EQC). We will take a look at Cogent Communications Holdings Inc. (NASDAQ:CCOI), Tetra Tech, Inc. (NASDAQ:TTEK), Plains All American Pipeline, L.P. (NYSE:PAA), and Allison Transmission Holdings Inc (NYSE:ALSN). This group of stocks’ market caps are closest to EQC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCOI 27 454195 3
TTEK 21 115608 -2
PAA 8 44850 -4
ALSN 27 404743 -6
Average 20.75 254849 -2.25

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 $255 million. That figure was $176 million in EQC’s case. Cogent Communications Holdings Inc. (NASDAQ:CCOI) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 8 bullish hedge fund positions. Equity Commonwealth (NYSE:EQC) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately EQC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EQC investors were disappointed as the stock returned 3.1% 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 in 2020.

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