Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Essential Properties Realty Trust, Inc. (NYSE:EPRT) based on that data.
Is EPRT a good stock to buy now? Essential Properties Realty Trust, Inc. (NYSE:EPRT) investors should pay attention to a decrease in hedge fund interest of late. Essential Properties Realty Trust, Inc. (NYSE:EPRT) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 23. Our calculations also showed that EPRT 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. Now we’re going to review the key hedge fund action surrounding Essential Properties Realty Trust, Inc. (NYSE:EPRT).
Do Hedge Funds Think EPRT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EPRT over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Essential Properties Realty Trust, Inc. (NYSE:EPRT), which was worth $61.5 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $4.8 million worth of shares. Pinz Capital, Winton Capital Management, and Hill Winds Capital 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 Hill Winds Capital allocated the biggest weight to Essential Properties Realty Trust, Inc. (NYSE:EPRT), around 1.68% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, dishing out 1.18 percent of its 13F equity portfolio to EPRT.
Since Essential Properties Realty Trust, Inc. (NYSE:EPRT) has faced a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that decided to sell off their positions entirely heading into Q4. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest investment of the 750 funds followed by Insider Monkey, worth close to $13.2 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $1.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Essential Properties Realty Trust, Inc. (NYSE:EPRT). These stocks are Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), Accolade, Inc. (NASDAQ:ACCD), Independent Bank Group Inc (NASDAQ:IBTX), Badger Meter, Inc. (NYSE:BMI), Chimera Investment Corporation (NYSE:CIM), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), and Prospect Capital Corporation (NASDAQ:PSEC). This group of stocks’ market values resemble EPRT’s market value.
|No of HFs with positions
|Total Value of HF Positions (x1000)
|Change in HF Position
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $79 million in EPRT’s case. Chimera Investment Corporation (NYSE:CIM) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Essential Properties Realty Trust, Inc. (NYSE:EPRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EPRT is 46.1. 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. Hedge funds were also right about betting on EPRT as the stock returned 17.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Essential Properties Realty Trust Inc. (NYSE:EPRT)
Follow Essential Properties Realty Trust Inc. (NYSE:EPRT)
Disclosure: None. This article was originally published at Insider Monkey.