Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Agree Realty Corporation (NYSE:ADC) a safe investment now? Prominent investors are surely becoming hopeful. The number of bullish hedge fund investments moved up by 3 recently. ADC was in 13 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with ADC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Gibraltar Industries Inc (NASDAQ:ROCK), The Buckle, Inc. (NYSE:BKE), and BNC Bancorp (NASDAQ:BNCN) to gather more data points.
Follow Agree Realty Corp (NYSE:ADC)
Follow Agree Realty Corp (NYSE:ADC)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How have hedgies been trading Agree Realty Corporation (NYSE:ADC)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 30% from the second quarter of 2016. On the other hand, there were a total of 9 hedge funds with a bullish position in ADC at the beginning of this year. So, let’s find out 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, AQR Capital Management, led by Cliff Asness, holds the biggest position in Agree Realty Corporation (NYSE:ADC). AQR Capital Management has a $8.8 million position in the stock. On AQR Capital Management’s heels is Millennium Management, one of the largest hedge funds in the world, holding a $8.1 million position. Other professional money managers that are bullish include Greg Poole’s Echo Street Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. 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.
As industrywide interest jumped, key money managers were leading the bulls’ herd. D. E. Shaw’s D E Shaw initiated the biggest position in Agree Realty Corporation (NYSE:ADC). D E Shaw had $0.5 million invested in the company at the end of the quarter. Jim Simons’ Renaissance Technologies also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Robert B. Gillam’s McKinley Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Agree Realty Corporation (NYSE:ADC) but similarly valued. We will take a look at Gibraltar Industries Inc (NASDAQ:ROCK), The Buckle, Inc. (NYSE:BKE), BNC Bancorp (NASDAQ:BNCN), and Osisko Gold Royalties Ltd (NYSE:OR). This group of stocks’ market values are similar to ADC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROCK | 23 | 144533 | 2 |
| BKE | 15 | 114776 | 3 |
| BNCN | 14 | 58271 | -1 |
| OR | 5 | 13875 | 5 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $39 million in ADC’s case. Gibraltar Industries Inc (NASDAQ:ROCK) is the most popular stock in this table. On the other hand Osisko Gold Royalties Ltd (NYSE:OR) is the least popular one with only 5 bullish hedge fund positions. Agree Realty Corporation (NYSE:ADC) 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 ROCK might be a better candidate to consider taking a long position in.
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Disclosure: None
