You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Physicians Realty Trust (NYSE:DOC) has experienced an increase in support from the world’s most elite money managers lately. Our calculations also showed that DOC isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
Sander Gerber of Hudson Bay Capital
We’re going to take a peek at the recent hedge fund action regarding Physicians Realty Trust (NYSE:DOC).
What does the smart money think about Physicians Realty Trust (NYSE:DOC)?
At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2018. By comparison, 11 hedge funds held shares or bullish call options in DOC a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Physicians Realty Trust (NYSE:DOC) was held by Citadel Investment Group, which reported holding $32.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $18.8 million position. Other investors bullish on the company included Millennium Management, Hudson Bay Capital Management, and D E Shaw.
Now, specific money managers have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, created the most outsized position in Physicians Realty Trust (NYSE:DOC). Hudson Bay Capital Management had $11.8 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $3.5 million position during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to Physicians Realty Trust (NYSE:DOC). We will take a look at Valero Energy Partners LP (NYSE:VLP), Extended Stay America Inc (NASDAQ:STAY), Nomad Foods Limited (NYSE:NOMD), and GDS Holdings Limited (NASDAQ:GDS). All of these stocks’ market caps match DOC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VLP | 7 | 87725 | 4 |
| STAY | 32 | 404562 | 2 |
| NOMD | 31 | 251607 | -3 |
| GDS | 25 | 426393 | -1 |
| Average | 23.75 | 292572 | 0.5 |
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 $293 million. That figure was $93 million in DOC’s case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand Valero Energy Partners LP (NYSE:VLP) is the least popular one with only 7 bullish hedge fund positions. Physicians Realty Trust (NYSE:DOC) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately DOC wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); DOC investors were disappointed as the stock returned 13.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
