At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Seritage Growth Properties (NYSE:SRG) makes for a good investment right now.
Is SRG a good stock to buy now? Hedge funds were reducing their bets on the stock. The number of long hedge fund positions were trimmed by 6 in recent months. Seritage Growth Properties (NYSE:SRG) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 27. Our calculations also showed that SRG 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). There were 18 hedge funds in our database with SRG positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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 we’re going to take a look at the new hedge fund action surrounding Seritage Growth Properties (NYSE:SRG).
Do Hedge Funds Think SRG Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in SRG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Seritage Growth Properties (NYSE:SRG) was held by Mohnish Pabrai, which reported holding $63.7 million worth of stock at the end of September. It was followed by Empyrean Capital Partners with a $13.5 million position. Other investors bullish on the company included BloombergSen, ESL Investments, and Third Avenue Management. In terms of the portfolio weights assigned to each position Mohnish Pabrai allocated the biggest weight to Seritage Growth Properties (NYSE:SRG), around 42.68% of its 13F portfolio. Aquamarine Capital Management is also relatively very bullish on the stock, dishing out 4.44 percent of its 13F equity portfolio to SRG.
Seeing as Seritage Growth Properties (NYSE:SRG) has faced declining sentiment from the smart money, we can see that there lies a certain “tier” of hedge funds that elected to cut their entire stakes heading into Q4. Intriguingly, Christian Leone’s Luxor Capital Group said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $3.3 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund cut about $1.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Seritage Growth Properties (NYSE:SRG). We will take a look at Phoenix Tree Holdings Limited (NYSE:DNK), Nantkwest Inc (NASDAQ:NK), Central Securities Corporation (NYSE:CET), Vapotherm, Inc. (NYSE:VAPO), Criteo SA (NASDAQ:CRTO), PAR Technology Corporation (NYSE:PAR), and Guess’, Inc. (NYSE:GES). This group of stocks’ market values are similar to SRG’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 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $126 million in SRG’s case. Vapotherm, Inc. (NYSE:VAPO) is the most popular stock in this table. On the other hand Phoenix Tree Holdings Limited (NYSE:DNK) is the least popular one with only 3 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. Our overall hedge fund sentiment score for SRG is 42.3. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on SRG as the stock returned 29.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.