Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Spirit Realty Capital Inc (NYSE:SRC).
Is SRC a good stock to buy now? Spirit Realty Capital Inc (NYSE:SRC) has seen a decrease in hedge fund interest in recent months. Spirit Realty Capital Inc (NYSE:SRC) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 37. Our calculations also showed that SRC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a look at the latest hedge fund action regarding Spirit Realty Capital Inc (NYSE:SRC).
Do Hedge Funds Think SRC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in SRC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Spirit Realty Capital Inc (NYSE:SRC) was held by Citadel Investment Group, which reported holding $30.6 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $30.1 million position. Other investors bullish on the company included MSDC Management, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position MSDC Management allocated the biggest weight to Spirit Realty Capital Inc (NYSE:SRC), around 5.83% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, dishing out 1.78 percent of its 13F equity portfolio to SRC.
Seeing as Spirit Realty Capital Inc (NYSE:SRC) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds that slashed their full holdings by the end of the third quarter. At the top of the heap, Josh Donfeld and David Rogers’s Castle Hook Partners sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at about $3.4 million in stock, and Matthew L Pinz’s Pinz Capital was right behind this move, as the fund sold off about $3.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Spirit Realty Capital Inc (NYSE:SRC) but similarly valued. These stocks are Fate Therapeutics Inc (NASDAQ:FATE), Endava plc (NYSE:DAVA), Lazard Ltd (NYSE:LAZ), Stifel Financial Corp. (NYSE:SF), Brixmor Property Group Inc (NYSE:BRX), Proto Labs Inc (NYSE:PRLB), and Inspire Medical Systems, Inc. (NYSE:INSP). This group of stocks’ market values match SRC’s market value.
|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 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $354 million. That figure was $136 million in SRC’s case. Fate Therapeutics Inc (NASDAQ:FATE) is the most popular stock in this table. On the other hand Endava plc (NYSE:DAVA) is the least popular one with only 11 bullish hedge fund positions. Spirit Realty Capital Inc (NYSE:SRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SRC is 26.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on SRC as the stock returned 18.7% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.