How Did Simon Property Group, Inc (SPG) Compare Against Hedge Fund Darlings in 2019?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Simon Property Group, Inc (NYSE:SPG) and see how the stock performed in comparison to hedge funds’ consensus picks.

Is Simon Property Group, Inc (NYSE:SPG) worth your attention right now? Prominent investors are taking a pessimistic view. The number of bullish hedge fund positions shrunk by 1 lately. Our calculations also showed that SPG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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 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 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.

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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Simon Property Group, Inc (NYSE:SPG).

How are hedge funds trading Simon Property Group, Inc (NYSE:SPG)?

Heading into the fourth quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SPG over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in Simon Property Group, Inc (NYSE:SPG). Renaissance Technologies has a $123.2 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $108.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of Cliff Asness’s AQR Capital Management, Noam Gottesman’s GLG Partners and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Gabalex Capital allocated the biggest weight to Simon Property Group, Inc (NYSE:SPG), around 3.57% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, setting aside 0.6 percent of its 13F equity portfolio to SPG.

Since Simon Property Group, Inc (NYSE:SPG) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few funds that elected to cut their positions entirely heading into Q4. Intriguingly, Jeffrey Furber’s AEW Capital Management dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising about $233.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $69.5 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Simon Property Group, Inc (NYSE:SPG). We will take a look at Global Payments Inc (NYSE:GPN), ServiceNow Inc (NYSE:NOW), Norfolk Southern Corp. (NYSE:NSC), and Prudential Public Limited Company (NYSE:PUK). This group of stocks’ market valuations are closest to SPG’s market valuation.

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As you can see these stocks had an average of 51.75 hedge funds with bullish positions and the average amount invested in these stocks was $2699 million. That figure was $698 million in SPG’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 11 bullish hedge fund positions. Simon Property Group, Inc (NYSE:SPG) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SPG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SPG investors were disappointed as the stock returned -6.7% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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