Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Gladstone Land Corporation (NASDAQ:LAND).
Is Gladstone Land (LAND) a good stock to buy now? Hedge fund interest in Gladstone Land Corporation (NASDAQ:LAND) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LAND 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), Blue Bird Corporation (NASDAQ:BLBD), and Amalgamated Bank (NASDAQ:AMAL) to gather more data points.
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. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding Gladstone Land Corporation (NASDAQ:LAND).
How are hedge funds trading Gladstone Land Corporation (NASDAQ:LAND)?
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LAND over the last 21 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.
More specifically, Renaissance Technologies was the largest shareholder of Gladstone Land Corporation (NASDAQ:LAND), with a stake worth $5.4 million reported as of the end of September. Trailing Renaissance Technologies was Two Sigma Advisors, which amassed a stake valued at $1.6 million. Winton Capital Management, Millennium Management, and Horizon Asset Management 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 Zebra Capital Management allocated the biggest weight to Gladstone Land Corporation (NASDAQ:LAND), around 0.28% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to LAND.
Because Gladstone Land Corporation (NASDAQ:LAND) has faced declining sentiment from hedge fund managers, it’s easy to see that there were a few hedgies who sold off their full holdings in the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dumped the biggest investment of the 750 funds tracked by Insider Monkey, worth close to $1.1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gladstone Land Corporation (NASDAQ:LAND) but similarly valued. These stocks are MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), Blue Bird Corporation (NASDAQ:BLBD), Amalgamated Bank (NASDAQ:AMAL), Magenta Therapeutics, Inc. (NASDAQ:MGTA), Ituran Location and Control Ltd. (NASDAQ:ITRN), City Office REIT Inc (NYSE:CIO), and Blink Charging Co. (NASDAQ:BLNK). This group of stocks’ market caps match LAND’s market cap.
|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 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $10 million in LAND’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Blink Charging Co. (NASDAQ:BLNK) is the least popular one with only 5 bullish hedge fund positions. Gladstone Land Corporation (NASDAQ:LAND) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LAND is 39.6. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately LAND wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LAND investors were disappointed as the stock returned -3.3% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.