It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Alexander’s, Inc. (NYSE:ALX) during the quarter below.
Is Alexander’s, Inc. (NYSE:ALX) an attractive investment today? Investors who are in the know are becoming less confident. The number of bullish hedge fund positions went down by 2 in recent months. Our calculations also showed that ALX isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 32 percentage points since May 2014 through March 12, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a gander at the key hedge fund action regarding Alexander’s, Inc. (NYSE:ALX).
How have hedgies been trading Alexander’s, Inc. (NYSE:ALX)?
Heading into the first quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ALX over the last 14 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, EMS Capital held the most valuable stake in Alexander’s, Inc. (NYSE:ALX), which was worth $28 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $25.2 million worth of shares. Moreover, Millennium Management, AQR Capital Management, and Zebra Capital Management were also bullish on Alexander’s, Inc. (NYSE:ALX), allocating a large percentage of their portfolios to this stock.
Seeing as Alexander’s, Inc. (NYSE:ALX) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Noam Gottesman’s GLG Partners said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $0.3 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alexander’s, Inc. (NYSE:ALX) but similarly valued. We will take a look at Tri Pointe Group Inc (NYSE:TPH), HNI Corp (NYSE:HNI), Cision Ltd. (NYSE:CISN), and Pretium Resources Inc (NYSE:PVG). This group of stocks’ market values are similar to ALX’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 18 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $55 million in ALX’s case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand Tri Pointe Group Inc (NYSE:TPH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Alexander’s, Inc. (NYSE:ALX) is even less popular than TPH. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ALX, though not to the same extent, as the stock returned 22.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.