It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Arbor Realty Trust, Inc. (NYSE:ABR).
Is Arbor Realty Trust, Inc. (NYSE:ABR) a buy right now? Hedge funds are getting less optimistic. The number of long hedge fund bets decreased by 1 in recent months. ABR was in 9 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with ABR holdings at the end of the previous quarter. At the end of this article we will also compare ABR to other stocks including Parker Drilling Company (NYSE:PKD), Medifast, Inc. (NYSE:MED), and Safeguard Scientifics, Inc (NYSE:SFE) to get a better sense of its popularity.
Keeping this in mind, we’re going to take a glance at the fresh action encompassing Arbor Realty Trust, Inc. (NYSE:ABR).
What have hedge funds been doing with Arbor Realty Trust, Inc. (NYSE:ABR)?
Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jim Simons’ Renaissance Technologies has the biggest position in Arbor Realty Trust, Inc. (NYSE:ABR), worth close to $1.4 million, amounting to less than 0.1% of its total 13F portfolio. Coming in second is D E Shaw, which holds a $1.3 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions comprise John Overdeck and David Siegel’s Two Sigma Advisors, J. Alan Reid, Jr.’s Forward Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: LMR Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified ABR as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks similar to Arbor Realty Trust, Inc. (NYSE:ABR). We will take a look at Parker Drilling Company (NYSE:PKD), Medifast, Inc. (NYSE:MED), Safeguard Scientifics, Inc (NYSE:SFE), and Suffolk Bancorp (NASDAQ:SUBK). This group of stocks’ market values resemble ABR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $8 million in ABR’s case. Medifast, Inc. (NYSE:MED) is the most popular stock in this table. On the other hand Safeguard Scientifics, Inc (NYSE:SFE) is the least popular one with only 5 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MED might be a better candidate to consider a long position.