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Is Seritage Growth Properties (SRG) Going to Burn These Hedge Funds?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Seritage Growth Properties (NYSE:SRG)? The smart money sentiment can provide an answer to this question.

Is Seritage Growth Properties (NYSE:SRG) a buy right now? The smart money is in a pessimistic mood. The number of long hedge fund bets went down by 2 lately. Our calculations also showed that SRG isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of indicators stock traders have at their disposal to analyze stocks. A pair of the most useful indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the best money managers can outpace their index-focused peers by a very impressive amount (see the details here).

SRG_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the new hedge fund action regarding Seritage Growth Properties (NYSE:SRG).

Hedge fund activity in Seritage Growth Properties (NYSE:SRG)

At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SRG over the last 16 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.

Jeffrey Gates Gates Capital

More specifically, BloombergSen was the largest shareholder of Seritage Growth Properties (NYSE:SRG), with a stake worth $122.9 million reported as of the end of March. Trailing BloombergSen was Empyrean Capital Partners, which amassed a stake valued at $107.4 million. EMS Capital, Gates Capital Management, and Wallace Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Because Seritage Growth Properties (NYSE:SRG) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies that elected to cut their full holdings in the second quarter. Intriguingly, Jay Petschek and Steven Major’s Corsair Capital Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising about $0.3 million in stock. John A. Levin’s fund, Levin Capital Strategies, also dropped its stock, about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Seritage Growth Properties (NYSE:SRG) but similarly valued. These stocks are Baozun Inc (NASDAQ:BZUN), EVO Payments, Inc. (NASDAQ:EVOP), Vishay Intertechnology, Inc. (NYSE:VSH), and First Financial Bancorp (NASDAQ:FFBC). All of these stocks’ market caps match SRG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BZUN 13 91161 -1
EVOP 13 73800 0
VSH 19 297689 -2
FFBC 8 29058 0
Average 13.25 122927 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $461 million in SRG’s case. Vishay Intertechnology, Inc. (NYSE:VSH) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Seritage Growth Properties (NYSE:SRG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SRG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SRG were disappointed as the stock returned -1.1% during the third 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 many of these stocks already outperformed the market so far this year.

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

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