Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Federal Realty Investment Trust (NYSE:FRT).
Is FRT a good stock to buy now? The smart money was becoming less confident. The number of bullish hedge fund bets decreased by 6 recently. Federal Realty Investment Trust (NYSE:FRT) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 26. 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 for a quick look at the top 5 stocks). There were 20 hedge funds in our database with FRT holdings at the end of June.
Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
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. With all of this in mind let’s analyze the new hedge fund action regarding Federal Realty Investment Trust (NYSE:FRT).
Do Hedge Funds Think FRT Is A Good Stock To Buy Now?
At third quarter’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FRT over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Eduardo Abush’s Waterfront Capital Partners has the number one position in Federal Realty Investment Trust (NYSE:FRT), worth close to $18.2 million, corresponding to 2.9% of its total 13F portfolio. Sitting at the No. 2 spot is Phill Gross and Robert Atchinson of Adage Capital Management, with a $5.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism consist of Israel Englander’s Millennium Management, David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Federal Realty Investment Trust (NYSE:FRT), around 2.92% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to FRT.
Seeing as Federal Realty Investment Trust (NYSE:FRT) has faced declining sentiment from hedge fund managers, it’s easy to see that there is a sect of hedge funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the largest position of the “upper crust” of funds watched by Insider Monkey, comprising close to $9.4 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $4.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Federal Realty Investment Trust (NYSE:FRT) but similarly valued. These stocks are Syneos Health, Inc. (NASDAQ:SYNH), Bausch Health Companies (NYSE:BHC), ANGI Homeservices Inc (NASDAQ:ANGI), Hanesbrands Inc. (NYSE:HBI), Emergent Biosolutions Inc (NYSE:EBS), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), and Leggett & Platt, Inc. (NYSE:LEG). This group of stocks’ market valuations match FRT’s market valuation.
|Ticker||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 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $37 million in FRT’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Emergent Biosolutions Inc (NYSE:EBS) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Federal Realty Investment Trust (NYSE:FRT) is even less popular than EBS. Our overall hedge fund sentiment score for FRT is 15.2. 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. Hedge funds clearly dropped the ball on FRT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on FRT as the stock returned 22.1% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.