Hedge funds are known to underperform the bull markets but that’s not because they are terrible at stock picking. Hedge funds underperform because their net exposure in only 40-70% and they charge exorbitant fees. No one knows what the future holds and how market participants will react to the bountiful news that floods in each day. However, hedge funds’ consensus picks on average deliver market beating returns. For example in the first 2.5 months of this year the Standard and Poor’s 500 Index returned approximately 13.1% (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Interestingly, an average long/short hedge fund returned only 5% due to the hedges they implemented and the large fees they charged. If you pay attention to the actual hedge fund returns (5%) versus the returns of their long stock picks, you might believe that it is a waste of time to analyze hedge funds’ purchases. We know better. That’s why we scrutinize hedge fund sentiment before we invest in a stock like Weingarten Realty Investors (NYSE:WRI).
Weingarten Realty Investors (NYSE:WRI) was in 12 hedge funds’ portfolios at the end of December. WRI has seen an increase in activity from the world’s largest hedge funds recently. There were 11 hedge funds in our database with WRI holdings at the end of the previous quarter. Our calculations also showed that wri isn’t among the 30 most popular stocks among hedge funds.
According to most traders, hedge funds are perceived as unimportant, old financial tools of years past. While there are more than 8000 funds with their doors open at the moment, Our experts choose to focus on the moguls of this group, around 750 funds. It is estimated that this group of investors handle most of the hedge fund industry’s total capital, and by observing their top investments, Insider Monkey has revealed several investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to analyze the key hedge fund action regarding Weingarten Realty Investors (NYSE:WRI).
What have hedge funds been doing with Weingarten Realty Investors (NYSE:WRI)?
At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in WRI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Echo Street Capital Management was the largest shareholder of Weingarten Realty Investors (NYSE:WRI), with a stake worth $19.2 million reported as of the end of September. Trailing Echo Street Capital Management was Waterfront Capital Partners, which amassed a stake valued at $8.1 million. Two Sigma Advisors, Stevens Capital Management, and Fisher Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have been driving this bullishness. Stevens Capital Management, managed by Matthew Tewksbury, created the biggest position in Weingarten Realty Investors (NYSE:WRI). Stevens Capital Management had $2.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Weingarten Realty Investors (NYSE:WRI). We will take a look at Pluralsight, Inc. (NASDAQ:PS), Paylocity Holding Corp (NASDAQ:PCTY), FirstCash, Inc. (NASDAQ:FCFS), and Black Stone Minerals LP (NYSE:BSM). This group of stocks’ market valuations are closest to WRI’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $46 million in WRI’s case. Pluralsight, Inc. (NASDAQ:PS) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 5 bullish hedge fund positions. Weingarten Realty Investors (NYSE:WRI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately WRI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on WRI were disappointed as the stock returned 15.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.