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Is Healthcare Trust Of America Inc (HTA) Going to Burn These Hedge Funds?

“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Healthcare Trust Of America Inc (NYSE:HTA) and see how it was affected.

Is Healthcare Trust Of America Inc (NYSE:HTA) undervalued? The best stock pickers are getting more optimistic. The number of long hedge fund bets went up by 5 lately. Our calculations also showed that HTA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). HTA was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with HTA 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.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sander Gerber Hudson Bay Capital Management

Sander Gerber of Hudson Bay Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the new hedge fund action encompassing Healthcare Trust Of America Inc (NYSE:HTA).

Hedge fund activity in Healthcare Trust Of America Inc (NYSE:HTA)

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HTA over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

The largest stake in Healthcare Trust Of America Inc (NYSE:HTA) was held by Echo Street Capital Management, which reported holding $68.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $58.6 million position. Other investors bullish on the company included Carlson Capital, Millennium Management, and Hudson Bay Capital Management. In terms of the portfolio weights assigned to each position Echo Street Capital Management allocated the biggest weight to Healthcare Trust Of America Inc (NYSE:HTA), around 1.17% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, dishing out 1.03 percent of its 13F equity portfolio to HTA.

Consequently, key money managers have jumped into Healthcare Trust Of America Inc (NYSE:HTA) headfirst. Waterfront Capital Partners, managed by Eduardo Abush, created the most outsized position in Healthcare Trust Of America Inc (NYSE:HTA). Waterfront Capital Partners had $6.7 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $2.4 million position during the quarter. The following funds were also among the new HTA investors: Perella Weinberg Partners, Paul Marshall and Ian Wace’s Marshall Wace, and Mike Vranos’s Ellington.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Healthcare Trust Of America Inc (NYSE:HTA) but similarly valued. We will take a look at Zscaler, Inc. (NASDAQ:ZS), Ares Management Corporation (NYSE:ARES), Mellanox Technologies, Ltd. (NASDAQ:MLNX), and Park Hotels & Resorts Inc. (NYSE:PK). This group of stocks’ market caps resemble HTA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZS 20 133861 -5
ARES 17 222255 7
MLNX 39 1506689 0
PK 19 378136 -6
Average 23.75 560235 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $560 million. That figure was $271 million in HTA’s case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Ares Management Corporation (NYSE:ARES) is the least popular one with only 17 bullish hedge fund positions. Healthcare Trust Of America Inc (NYSE:HTA) is not the least popular stock in this group but hedge fund interest is still below average. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HTA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HTA investors were disappointed as the stock returned 4.4% during the first two months of the fourth quarter 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 in Q4.

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

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