Is Easterly Government Properties Inc (DEA) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Easterly Government Properties Inc (NYSE:DEA) and determine whether hedge funds skillfully traded this stock.

Easterly Government Properties Inc (NYSE:DEA) investors should be aware of an increase in enthusiasm from smart money lately. DEA was in 11 hedge funds’ portfolios at the end of March. There were 10 hedge funds in our database with DEA holdings at the end of the previous quarter. Our calculations also showed that DEA 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 21st century investor’s toolkit there are tons of gauges market participants employ to grade their stock investments. Two of the most innovative gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the market by a significant amount (see the details here).

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action regarding Easterly Government Properties Inc (NYSE:DEA).

How are hedge funds trading Easterly Government Properties Inc (NYSE:DEA)?

Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DEA over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DEA A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, V3 Capital, managed by Charles Fitzgerald, holds the most valuable position in Easterly Government Properties Inc (NYSE:DEA). V3 Capital has a $68.9 million position in the stock, comprising 15.1% of its 13F portfolio. Coming in second is Renaissance Technologies,  holding a $53.5 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism include David Harding’s Winton Capital Management, Mark Coe’s Intrinsic Edge Capital and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position V3 Capital allocated the biggest weight to Easterly Government Properties Inc (NYSE:DEA), around 15.07% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 0.71 percent of its 13F equity portfolio to DEA.

As aggregate interest increased, key hedge funds have jumped into Easterly Government Properties Inc (NYSE:DEA) headfirst. V3 Capital, managed by Charles Fitzgerald, assembled the biggest position in Easterly Government Properties Inc (NYSE:DEA). V3 Capital had $68.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $2.8 million position during the quarter. The other funds with new positions in the stock are Bruce Kovner’s Caxton Associates LP, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Easterly Government Properties Inc (NYSE:DEA) but similarly valued. These stocks are Sensient Technologies Corporation (NYSE:SXT), Olin Corporation (NYSE:OLN), The Simply Good Foods Company (NASDAQ:SMPL), and SVMK Inc. (NASDAQ:SVMK). All of these stocks’ market caps are similar to DEA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SXT 23 83186 3
OLN 33 431603 0
SMPL 19 152168 -15
SVMK 29 211973 -2
Average 26 219733 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $151 million in DEA’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand The Simply Good Foods Company (NASDAQ:SMPL) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Easterly Government Properties Inc (NYSE:DEA) is even less popular than SMPL. Hedge funds dodged a bullet by taking a bearish stance towards DEA. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately DEA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); DEA investors were disappointed as the stock returned -5.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

Follow Easterly Government Properties Inc. (NYSE:DEA)

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