Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Clipper Realty Inc. (NYSE:CLPR).
Is CLPR a good stock to buy now? Clipper Realty Inc. (NYSE:CLPR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that CLPR 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). At the end of this article we will also compare CLPR to other stocks including Everspin Technologies, Inc. (NASDAQ:MRAM), Alaska Communications Systems Group Inc (NASDAQ:ALSK), and BankFinancial Corporation (NASDAQ:BFIN) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are seen as unimportant, old investment tools of the past. While there are greater than 8000 funds in operation at the moment, Our researchers choose to focus on the upper echelon of this club, about 850 funds. These money managers orchestrate most of the hedge fund industry’s total capital, and by keeping track of their matchless equity investments, Insider Monkey has identified various investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. Keeping this in mind we’re going to go over the key hedge fund action encompassing Clipper Realty Inc. (NYSE:CLPR).
Do Hedge Funds Think CLPR Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in CLPR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Indaba Capital Management, managed by Derek C. Schrier, holds the number one position in Clipper Realty Inc. (NYSE:CLPR). Indaba Capital Management has a $10.5 million position in the stock, comprising 3.4% of its 13F portfolio. Coming in second is Don Morgan of Brigade Capital, with a $6.5 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism encompass J. Alan Reid, Jr.’s Forward Management, Renaissance Technologies and Jared Nussbaum’s Nut Tree Capital. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Clipper Realty Inc. (NYSE:CLPR), around 3.35% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, dishing out 1.02 percent of its 13F equity portfolio to CLPR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Zebra Capital Management).
Let’s also examine hedge fund activity in other stocks similar to Clipper Realty Inc. (NYSE:CLPR). These stocks are Everspin Technologies, Inc. (NASDAQ:MRAM), Alaska Communications Systems Group Inc (NASDAQ:ALSK), BankFinancial Corporation (NASDAQ:BFIN), Reading International Inc (NASDAQ:RDIB), Reading International, Inc. (NASDAQ:RDI), SPI Energy Co., Ltd. (NASDAQ:SPI), and Key Tronic Corporation (NASDAQ:KTCC). This group of stocks’ market values match CLPR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $26 million in CLPR’s case. Alaska Communications Systems Group Inc (NASDAQ:ALSK) is the most popular stock in this table. On the other hand Reading International Inc (NASDAQ:RDIB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Clipper Realty Inc. (NYSE:CLPR) is more popular among hedge funds. Our overall hedge fund sentiment score for CLPR is 85. 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. Unfortunately CLPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLPR were disappointed as the stock returned 9.1% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.