Does Lexington Realty Trust (NYSE:LXP) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
Lexington Realty Trust (NYSE:LXP) shareholders have witnessed an increase in hedge fund interest of late. Our calculations also showed that LXP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 go over the new hedge fund action regarding Lexington Realty Trust (NYSE:LXP).
How are hedge funds trading Lexington Realty Trust (NYSE:LXP)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in LXP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Carlson Capital, managed by Clint Carlson, holds the largest position in Lexington Realty Trust (NYSE:LXP). Carlson Capital has a $32.5 million position in the stock, comprising 0.6% of its 13F portfolio. On Carlson Capital’s heels is Balyasny Asset Management, led by Dmitry Balyasny, holding a $23.5 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of J. Alan Reid, Jr.’s Forward Management, John Overdeck, and David Siegel’s Two Sigma Advisors and Jim Simons (founder)’s Renaissance Technologies. In terms of the portfolio weights assigned to each position Forward Management allocated the biggest weight to Lexington Realty Trust (NYSE:LXP), around 2.57% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.69 percent of its 13F equity portfolio to LXP.
Consequently, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the most valuable position in Lexington Realty Trust (NYSE:LXP). Citadel Investment Group had $2.4 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new LXP investors: Mike Vranos’s Ellington and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Lexington Realty Trust (NYSE:LXP) but similarly valued. These stocks are ABM Industries, Inc. (NYSE:ABM), Argo Group International Holdings, Ltd. (NYSE:ARGO), Acadia Realty Trust (NYSE:AKR), and Wolverine World Wide, Inc. (NYSE:WWW). This group of stocks’ market caps resembles LXP’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 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $108 million in LXP’s case. Wolverine World Wide, Inc. (NYSE:WWW) is the most popular stock in this table. On the other hand, ABM Industries, Inc. (NYSE:ABM) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Lexington Realty Trust (NYSE:LXP) is even less popular than ABM. 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. A small number of hedge funds were also right about betting on LXP, though not to the same extent, as the stock returned 8.1% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.