At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Monogram Residential Trust Inc (NYSE:MORE) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare MORE to other stocks including Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), Inphi Corporation (NYSE:IPHI), and HNI Corp (NYSE:HNI) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
With all of this in mind, let’s go over the latest action surrounding Monogram Residential Trust Inc (NYSE:MORE).
What does the smart money think about Monogram Residential Trust Inc (NYSE:MORE)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MORE over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Gratia Capital, led by Steve Pei, holds the largest position in Monogram Residential Trust Inc (NYSE:MORE). According to regulatory filings, the fund has a $6 million position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by Millennium Management, one of the 10 largest hedge funds in the world, which oversees a $5.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Isaac Corre’s Governors Lane, Cliff Asness’ AQR Capital Management and George Hall’s Clinton Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Since Monogram Residential Trust Inc (NYSE:MORE) has faced bearish sentiment from the smart money, logic holds that there is a sect of hedgies that slashed their full holdings heading into Q4. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest position of the 700 funds monitored by Insider Monkey, worth about $1.2 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $0.9 million worth of MORE shares.
Let’s now review hedge fund activity in other stocks similar to Monogram Residential Trust Inc (NYSE:MORE). These stocks are Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), Inphi Corporation (NYSE:IPHI), HNI Corp (NYSE:HNI), and Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS). This group of stocks’ market valuations are similar to MORE’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $22 million in MORE’s case. Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Monogram Residential Trust Inc (NYSE:MORE) is even less popular than VLRS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.