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Is Federal Realty Investment Trust (FRT) Going to Burn These Hedge Funds?

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Federal Realty Investment Trust (NYSE:FRT).

Is Federal Realty Investment Trust (NYSE:FRT) going to take off soon? The best stock pickers are becoming less hopeful. The number of bullish hedge fund positions were trimmed by 1 recently. Our calculations also showed that FRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). FRT was in 22 hedge funds’ portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with FRT positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the latest hedge fund action encompassing Federal Realty Investment Trust (NYSE:FRT).

How are hedge funds trading Federal Realty Investment Trust (NYSE:FRT)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the second quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in FRT a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, Carlson Capital held the most valuable stake in Federal Realty Investment Trust (NYSE:FRT), which was worth $48.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $22.1 million worth of shares. Millennium Management, Adage Capital Management, and Tudor Investment Corp 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 Carlson Capital allocated the biggest weight to Federal Realty Investment Trust (NYSE:FRT), around 0.87% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.31 percent of its 13F equity portfolio to FRT.

Judging by the fact that Federal Realty Investment Trust (NYSE:FRT) has faced falling interest from the smart money, it’s safe to say that there exists a select few fund managers that decided to sell off their positions entirely heading into Q4. Intriguingly, Jeffrey Furber’s AEW Capital Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, worth an estimated $68.2 million in stock. Ken Heebner’s fund, Capital Growth Management, also said goodbye to its stock, about $10.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Federal Realty Investment Trust (NYSE:FRT) but similarly valued. We will take a look at Mylan N.V. (NASDAQ:MYL), Brown & Brown, Inc. (NYSE:BRO), Tyler Technologies, Inc. (NYSE:TYL), and Insulet Corporation (NASDAQ:PODD). This group of stocks’ market values are closest to FRT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYL 33 1718513 3
BRO 28 810178 7
TYL 26 602875 2
PODD 37 500045 13
Average 31 907903 6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $908 million. That figure was $147 million in FRT’s case. Insulet Corporation (NASDAQ:PODD) is the most popular stock in this table. On the other hand Tyler Technologies, Inc. (NYSE:TYL) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Federal Realty Investment Trust (NYSE:FRT) is even less popular than TYL. Hedge funds dodged a bullet by taking a bearish stance towards FRT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FRT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FRT investors were disappointed as the stock returned -3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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