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Is Home Properties, Inc. (HME) Going to Burn These Hedge Funds?

Is it smart to be bullish on Home Properties, Inc. (NYSE:HME)?

Now, according to many market players, hedge funds are viewed as overrated, old financial tools of an era lost to time. Although there are more than 8,000 hedge funds with their doors open today, this site aim at the top tier of this group, around 525 funds. It is assumed that this group oversees the lion’s share of the smart money’s total capital, and by tracking their highest quality picks, we’ve uncovered a number of investment strategies that have historically outpaced the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as crucial, bullish insider trading activity is a second way to analyze the investments you’re interested in. Obviously, there are many incentives for an executive to sell shares of his or her company, but only one, very simple reason why they would buy. Various academic studies have demonstrated the valuable potential of this tactic if shareholders know what to do (learn more here).

Home Properties Inc. – Highest Yield In The Apartment REITs

Thus, let’s examine the recent info for Home Properties, Inc. (NYSE:HME).

How are hedge funds trading Home Properties, Inc. (NYSE:HME)?

In preparation for the third quarter, a total of 7 of the hedge funds we track held long positions in this stock, a change of 40% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes significantly.

According to our 13F database, Richard Driehaus’s Driehaus Capital had the largest position in Home Properties, Inc. (NYSE:HME), worth close to $6.1 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $5.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Cliff Asness’s AQR Capital Management, J. Alan Reid, Jr.’s Forward Management and Matthew Hulsizer’s PEAK6 Capital Management.

As industrywide interest increased, certain bigger names were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, created the most outsized position in Home Properties, Inc. (NYSE:HME). Driehaus Capital had 6.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $5.8 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, J. Alan Reid, Jr.’s Forward Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Insider trading activity in Home Properties, Inc. (NYSE:HME)

Legal insider trading, particularly when it’s bullish, is most useful when the company in question has seen transactions within the past 180 days. Over the latest half-year time period, Home Properties, Inc. (NYSE:HME) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Home Properties, Inc. (NYSE:HME). These stocks are Post Properties Inc (NYSE:PPS), Hatteras Financial Corp. (NYSE:HTS), BRE Properties Inc (NYSE:BRE), Mid America Apartment Communities Inc (NYSE:MAA), and Equity Lifestyle Properties, Inc. (NYSE:ELS). This group of stocks are the members of the reit – residential industry and their market caps match HME’s market cap.