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Is UDR, Inc. (UDR) A Good Stock To Buy According To Hedge Funds?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ recent losses in Facebook. Let’s take a closer look at what the funds we track think about UDR, Inc. (NYSE:UDR) in this article.

Is UDR, Inc. (NYSE:UDR) a good stock to buy? The best stock pickers are getting less optimistic. The number of long hedge fund bets dropped by 1 lately. Our calculations also showed that UDR 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 18 percentage points since May 2014 through December 3, 2018 (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.

CITADEL INVESTMENT GROUP

We’re going to take a look at the recent hedge fund action regarding UDR, Inc. (NYSE:UDR).

What does the smart money think about UDR, Inc. (NYSE:UDR)?

Heading into the fourth quarter of 2018, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in UDR over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds UDR Positions

More specifically, Renaissance Technologies was the largest shareholder of UDR, Inc. (NYSE:UDR), with a stake worth $371.9 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $32.6 million. Adage Capital Management, Highbridge Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as UDR, Inc. (NYSE:UDR) has witnessed falling interest from hedge fund managers, logic holds that there were a few fund managers that decided to sell off their full holdings heading into Q3. Intriguingly, D. E. Shaw’s D E Shaw cut the biggest investment of the 700 funds tracked by Insider Monkey, worth about $6.8 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dumped about $5.8 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as UDR, Inc. (NYSE:UDR) but similarly valued. These stocks are Dropbox, Inc. (NASDAQ:DBX), Yandex NV (NASDAQ:YNDX), Westlake Chemical Corporation (NYSE:WLK), and PerkinElmer, Inc. (NYSE:PKI). This group of stocks’ market caps are closest to UDR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DBX 27 461569 0
YNDX 37 984529 -1
WLK 19 326824 -5
PKI 23 1117448 1
Average 26.5 722593 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $447 million in UDR’s case. Yandex NV (NASDAQ:YNDX) is the most popular stock in this table. On the other hand Westlake Chemical Corporation (NYSE:WLK) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks UDR, Inc. (NYSE:UDR) is even less popular than WLK. 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.

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

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