Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Empire State Realty Trust Inc (NYSE:ESRT) undervalued? The smart money is selling. The number of long hedge fund positions went down by 6 lately. Empire State Realty Trust Inc (NYSE:ESRT) was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. There were 15 hedge funds in our database with Empire State Realty Trust Inc (NYSE:ESRT) holdings at the end of the previous quarter. On the contrary, the stock market had a passive outlook for the stock, which was down 0.18% during the quarter.
One of the best ways to find hedge fund sentiment surrounding a particular stock is to compare their outlook towards companies with similar market caps. At the end of this article, we will compare Empire State Realty Trust Inc (NYSE:ESRT) to other stocks, including Grupo Aeroportuario dl Srst SAB CV (ADR) (NYSE:ASR), Howard Hughes Corp (NYSE:HHC), and Legg Mason, Inc. (NYSE:LM) to get a better sense of its popularity.
Follow Empire State Realty Trust Inc. (NYSE:ESRT)
Follow Empire State Realty Trust Inc. (NYSE:ESRT)
Today there are plenty of methods shareholders use to assess stocks. A duo of the less known methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outclass the S&P 500 by a very impressive amount (see the details here).
Keeping this in mind, let’s take a glance at the recent action surrounding Empire State Realty Trust Inc (NYSE:ESRT).
What does the smart money think about Empire State Realty Trust Inc (NYSE:ESRT)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 40% from one quarter earlier. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Southeastern Asset Management, managed by Mason Hawkins, holds the biggest position in Empire State Realty Trust Inc (NYSE:ESRT). Southeastern Asset Management has a $64.5 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager AEW Capital Management, with a $36.8 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Israel Englander’s Millennium Management, Renaissance Technologies, and D E Shaw.
Seeing as Empire State Realty Trust Inc (NYSE:ESRT) has witnessed a falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers who sold off their full holdings last quarter. Intriguingly, Rod Hinze’s KeyPoint Capital Management sold off the biggest stake of the 700 funds tracked by Insider Monkey, worth about $2.6 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $2.4 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest fell by 6 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Empire State Realty Trust Inc (NYSE:ESRT) but similarly valued. We will take a look at Grupo Aeroportuario dl Srst SAB CV (ADR) (NYSE:ASR), Howard Hughes Corp (NYSE:HHC), Legg Mason, Inc. (NYSE:LM), and Align Technology, Inc. (NASDAQ:ALGN). This group of stocks’ market values are similar to Empire State Realty Trust Inc (NYSE:ESRT)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASR | 6 | 56476 | 2 |
| HHC | 33 | 1295209 | 3 |
| LM | 33 | 1240024 | -6 |
| ALGN | 26 | 325365 | -4 |
As you can see, these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $149 million in Empire State Realty Trust Inc (NYSE:ESRT)’s case. Howard Hughes Corp (NYSE:HHC) is the most popular stock in this table. On the other hand, Grupo Aeroportuario dl Srst SAB CV (ADR) (NYSE:ASR) is the least popular one with only 6 bullish hedge fund positions. Empire State Realty Trust Inc (NYSE:ESRT) 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, Howard Hughes Corp (NYSE:HHC) might be a better candidate to consider a long position.
