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Is CareTrust REIT Inc (CTRE) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of CareTrust REIT Inc (NASDAQ:CTRE).

CareTrust REIT Inc (NASDAQ:CTRE) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that CTRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action encompassing CareTrust REIT Inc (NASDAQ:CTRE).

How have hedgies been trading CareTrust REIT Inc (NASDAQ:CTRE)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -46% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in CTRE a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the biggest position in CareTrust REIT Inc (NASDAQ:CTRE), worth close to $9.5 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $4.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to CareTrust REIT Inc (NASDAQ:CTRE), around 0.41% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to CTRE.

Due to the fact that CareTrust REIT Inc (NASDAQ:CTRE) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few fund managers that slashed their positions entirely in the first quarter. Interestingly, John Khoury’s Long Pond Capital sold off the largest investment of all the hedgies followed by Insider Monkey, comprising about $21.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $11.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 6 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to CareTrust REIT Inc (NASDAQ:CTRE). We will take a look at Pacira Biosciences Inc (NASDAQ:PCRX), Alexander’s, Inc. (NYSE:ALX), Chesapeake Utilities Corporation (NYSE:CPK), and KEMET Corporation (NYSE:KEM). This group of stocks’ market caps match CTRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCRX 26 368951 -2
ALX 8 110151 -5
CPK 7 25946 -1
KEM 18 230546 -3
Average 14.75 183899 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $20 million in CTRE’s case. Pacira Biosciences Inc (NASDAQ:PCRX) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks CareTrust REIT Inc (NASDAQ:CTRE) is even less popular than CPK. Hedge funds clearly dropped the ball on CTRE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on CTRE as the stock returned 34.3% so far in the second quarter and outperformed the market by an even larger margin.

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