Is ABR A Good Stock To Buy Now?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Arbor Realty Trust, Inc. (NYSE:ABR) to find out whether there were any major changes in hedge funds’ views.

Is ABR a good stock to buy now? Prominent investors were becoming more confident. The number of bullish hedge fund positions increased by 5 recently. Arbor Realty Trust, Inc. (NYSE:ABR) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 21. Our calculations also showed that ABR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 6 hedge funds in our database with ABR positions at the end of the second quarter.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a gander at the new hedge fund action encompassing Arbor Realty Trust, Inc. (NYSE:ABR).

Do Hedge Funds Think ABR Is A Good Stock To Buy Now?

At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 83% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ABR over the last 21 quarters. 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, Omega Advisors was the largest shareholder of Arbor Realty Trust, Inc. (NYSE:ABR), with a stake worth $26.7 million reported as of the end of September. Trailing Omega Advisors was Millennium Management, which amassed a stake valued at $11.3 million. PEAK6 Capital Management, Citadel Investment Group, and Citadel Investment Group 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 Omega Advisors allocated the biggest weight to Arbor Realty Trust, Inc. (NYSE:ABR), around 2.63% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, dishing out 0.4 percent of its 13F equity portfolio to ABR.

As aggregate interest increased, key hedge funds were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Arbor Realty Trust, Inc. (NYSE:ABR). D E Shaw had $1.6 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $1.2 million investment in the stock during the quarter. The other funds with brand new ABR positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Paul Tudor Jones’s Tudor Investment Corp, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks similar to Arbor Realty Trust, Inc. (NYSE:ABR). We will take a look at AMC Networks Inc (NASDAQ:AMCX), Frontline Ltd (NYSE:FRO), WW International, Inc. (NASDAQ:WW), Alamo Group, Inc. (NYSE:ALG), Vasta Platform Limited (NASDAQ:VSTA), Holly Energy Partners, L.P. (NYSE:HEP), and Hailiang Education Group Inc. (NASDAQ:HLG). This group of stocks’ market caps match ABR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMCX 28 218917 2
FRO 10 16368 -2
WW 27 219388 1
ALG 9 164770 -1
VSTA 8 41308 8
HEP 2 1314 0
HLG 1 6144 -1
Average 12.1 95458 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $49 million in ABR’s case. AMC Networks Inc (NASDAQ:AMCX) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 1 bullish hedge fund positions. Arbor Realty Trust, Inc. (NYSE:ABR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABR is 44.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ABR as the stock returned 27.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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