Here is What Hedge Funds Think About First Industrial Realty Trust, Inc. (FR)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on First Industrial Realty Trust, Inc. (NYSE:FR) in order to identify whether reputable and successful top money managers continue to believe in its potential.

First Industrial Realty Trust, Inc. (NYSE:FR) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. FR was in 11 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with FR holdings at the end of the previous quarter. Our calculations also showed that fr 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.

Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

We’re going to take a gander at the new hedge fund action regarding First Industrial Realty Trust, Inc. (NYSE:FR).

Hedge fund activity in First Industrial Realty Trust, Inc. (NYSE:FR)

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -39% from the fourth quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in FR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with FR Positions

The largest stake in First Industrial Realty Trust, Inc. (NYSE:FR) was held by Renaissance Technologies, which reported holding $121.2 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $54.9 million position. Other investors bullish on the company included Carlson Capital, Third Avenue Management, and Waterfront Capital Partners.

Since First Industrial Realty Trust, Inc. (NYSE:FR) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds that slashed their full holdings heading into Q3. It’s worth mentioning that Greg Poole’s Echo Street Capital Management sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $7.1 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dropped about $2.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 7 funds heading into Q3.

Let’s go over hedge fund activity in other stocks similar to First Industrial Realty Trust, Inc. (NYSE:FR). We will take a look at Haemonetics Corporation (NYSE:HAE), Texas Roadhouse Inc (NASDAQ:TXRH), Black Hills Corporation (NYSE:BKH), and CarGurus, Inc. (NASDAQ:CARG). This group of stocks’ market valuations resemble FR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HAE 24 648117 4
TXRH 25 267058 6
BKH 18 136002 1
CARG 24 819877 5
Average 22.75 467764 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $468 million. That figure was $304 million in FR’s case. Texas Roadhouse Inc (NASDAQ:TXRH) is the most popular stock in this table. On the other hand Black Hills Corporation (NYSE:BKH) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks First Industrial Realty Trust, Inc. (NYSE:FR) is even less popular than BKH. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on FR, though not to the same extent, as the stock returned 5.3% during the same time frame and outperformed the market as well.

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