We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Piedmont Office Realty Trust, Inc. (NYSE:PDM).
Piedmont Office Realty Trust, Inc. (NYSE:PDM) investors should be aware of a decrease in hedge fund interest recently. Our calculations also showed that PDM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action encompassing Piedmont Office Realty Trust, Inc. (NYSE:PDM).
What does smart money think about Piedmont Office Realty Trust, Inc. (NYSE:PDM)?
Heading into the fourth quarter of 2019, a total of 8 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 PDM over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Piedmont Office Realty Trust, Inc. (NYSE:PDM), which was worth $65.9 million at the end of the third quarter. On the second spot was GLG Partners which amassed $12.3 million worth of shares. AQR Capital Management, Winton Capital Management, and Stevens Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stevens Capital Management allocated the biggest weight to Piedmont Office Realty Trust, Inc. (NYSE:PDM), around 0.1% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to PDM.
Because Piedmont Office Realty Trust, Inc. (NYSE:PDM) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers who sold off their entire stakes by the end of the third quarter. Intriguingly, Jeffrey Furber’s AEW Capital Management cut the largest position of the 750 funds tracked by Insider Monkey, worth about $41.5 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $7.2 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Piedmont Office Realty Trust, Inc. (NYSE:PDM). These stocks are Monro Muffler Brake Inc (NASDAQ:MNRO), Retail Properties of America Inc (NYSE:RPAI), Farfetch Limited (NYSE:FTCH), and Crestwood Equity Partners LP (NYSE:CEQP). This group of stocks’ market values are similar to PDM’s market value.
|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 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $84 million in PDM’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 6 bullish hedge fund positions. Piedmont Office Realty Trust, Inc. (NYSE:PDM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PDM, though not to the same extent, as the stock returned 6.9% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.