We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Columbia Property Trust Inc (NYSE:CXP).
Is CXP a good stock to buy now? Columbia Property Trust Inc (NYSE:CXP) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. CXP investors should be aware of a decrease in support from the world’s most elite money managers recently. There were 16 hedge funds in our database with CXP holdings at the end of June. Our calculations also showed that CXP 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).
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 let’s analyze the key hedge fund action surrounding Columbia Property Trust Inc (NYSE:CXP).
Do Hedge Funds Think CXP Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the second quarter of 2020. On the other hand, there were a total of 15 hedge funds with a bullish position in CXP a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Columbia Property Trust Inc (NYSE:CXP), with a stake worth $17.2 million reported as of the end of September. Trailing D E Shaw was Arrowstreet Capital, which amassed a stake valued at $8.9 million. OZ Management, Citadel Investment Group, and Balyasny Asset Management 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 Quantinno Capital allocated the biggest weight to Columbia Property Trust Inc (NYSE:CXP), around 0.16% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to CXP.
Because Columbia Property Trust Inc (NYSE:CXP) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds who were dropping their positions entirely by the end of the third quarter. Interestingly, Richard Mashaal’s Rima Senvest Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $1.8 million in stock. J. Alan Reid, Jr.’s fund, Forward Management, also dropped its stock, about $0.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Columbia Property Trust Inc (NYSE:CXP) but similarly valued. We will take a look at Xperi Holding Corporation (NASDAQ:XPER), Retail Properties of America Inc (NYSE:RPAI), CVR Energy, Inc. (NYSE:CVI), National Research Corporation (NASDAQ:NRC), LexinFintech Holdings Ltd. (NASDAQ:LX), Fluor Corporation (NYSE:FLR), and Compass Diversified Holdings (NYSE:CODI). All of these stocks’ market caps match CXP’s market cap.
|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 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $48 million in CXP’s case. Xperi Holding Corporation (NASDAQ:XPER) is the most popular stock in this table. On the other hand Compass Diversified Holdings (NYSE:CODI) is the least popular one with only 3 bullish hedge fund positions. Columbia Property Trust Inc (NYSE:CXP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CXP is 54.5. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CXP as the stock returned 31.7% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey