Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Starwood Property Trust, Inc. (NYSE:STWD) .
Hedge fund interest in Starwood Property Trust, Inc. (NYSE:STWD) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare STWD to other stocks including Ingram Micro Inc. (NYSE:IM), Erie Indemnity Company (NASDAQ:ERIE), and Berry Plastics Group Inc (NYSE:BERY) to get a better sense of its popularity.
Follow Starwood Property Trust Inc. (NYSE:STWD)
Follow Starwood Property Trust Inc. (NYSE:STWD)
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How have hedgies been trading Starwood Property Trust, Inc. (NYSE:STWD)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. The graph below displays the number of hedge funds with bullish positions in STWD over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Glenhill Advisors, led by Glenn J. Krevlin, holds the biggest position in Starwood Property Trust, Inc. (NYSE:STWD). Glenhill Advisors has a $143 million position in the stock, comprising 8.6% of its 13F portfolio. On Glenhill Advisors’ heels is Kenneth Tropin of Graham Capital Management, with a $62.5 million position; the fund has 2% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include Amy Minella’s Cardinal Capital, and Charles Clough’s Clough Capital Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that Starwood Property Trust, Inc. (NYSE:STWD) has gone through falling interest from the smart money, it’s safe to say that there is a sect of fund managers that slashed their positions entirely heading into Q4. Interestingly, Arthur Wrubel’s Wesley Capital Management sold off the biggest stake of the 700 funds watched by Insider Monkey, worth an estimated $25.9 million in stock. Kenneth Tropin’s fund, Graham Capital Management, also cut its stock, about $10.1 million worth.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Starwood Property Trust, Inc. (NYSE:STWD) but similarly valued. These stocks are Ingram Micro Inc. (NYSE:IM), Erie Indemnity Company (NASDAQ:ERIE), Berry Plastics Group Inc (NYSE:BERY), and Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC). This group of stocks’ market values resemble STWD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IM | 41 | 964172 | 1 |
| ERIE | 9 | 61054 | -1 |
| BERY | 46 | 1297385 | -7 |
| PAC | 5 | 65220 | -1 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $597 million. That figure was $416 million in STWD’s case. Berry Plastics Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (ADR) (NYSE:PAC) is the least popular one with only 5 bullish hedge fund positions. Starwood Property Trust, Inc. (NYSE:STWD) 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. In this regard BERY might be a better candidate to consider taking a long position in.
Disclosure: None
