Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Healthcare Trust Of America Inc (NYSE:HTA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Healthcare Trust Of America Inc (NYSE:HTA) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that HTA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the recent hedge fund action surrounding Healthcare Trust Of America Inc (NYSE:HTA).
Hedge fund activity in Healthcare Trust Of America Inc (NYSE:HTA)
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HTA over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Healthcare Trust Of America Inc (NYSE:HTA), with a stake worth $49.1 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $41.7 million. Echo Street Capital Management, Waterfront Capital Partners, and Carlson 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 Waterfront Capital Partners allocated the biggest weight to Healthcare Trust Of America Inc (NYSE:HTA), around 4.05% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, designating 0.45 percent of its 13F equity portfolio to HTA.
Because Healthcare Trust Of America Inc (NYSE:HTA) has faced a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their positions entirely heading into Q4. Intriguingly, Sander Gerber’s Hudson Bay Capital Management sold off the biggest stake of all the hedgies watched by Insider Monkey, valued at about $16.2 million in stock, and Matthew Crandall Gilman’s Hill Winds Capital was right behind this move, as the fund cut about $7.3 million worth. These transactions are interesting, as total hedge fund interest fell by 9 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Healthcare Trust Of America Inc (NYSE:HTA). We will take a look at Dunkin Brands Group Inc (NASDAQ:DNKN), Wix.Com Ltd (NASDAQ:WIX), CACI International Inc (NYSE:CACI), and Tallgrass Energy, LP (NYSE:TGE). This group of stocks’ market caps match HTA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DNKN | 31 | 272021 | 3 |
| WIX | 34 | 1072887 | 1 |
| CACI | 24 | 441472 | -2 |
| TGE | 31 | 377431 | 8 |
| Average | 30 | 540953 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $541 million. That figure was $187 million in HTA’s case. Wix.Com Ltd (NASDAQ:WIX) is the most popular stock in this table. On the other hand CACI International Inc (NYSE:CACI) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Healthcare Trust Of America Inc (NYSE:HTA) is even less popular than CACI. Hedge funds clearly dropped the ball on HTA 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on HTA as the stock returned -17.3% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
