In this article we will check out the progression of hedge fund sentiment towards Whitestone REIT (NYSE:WSR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is WSR a good stock to buy now? The best stock pickers were becoming less confident. The number of long hedge fund bets shrunk by 1 in recent months. Whitestone REIT (NYSE:WSR) was in 8 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that WSR 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind we’re going to review the recent hedge fund action surrounding Whitestone REIT (NYSE:WSR).
How have hedgies been trading Whitestone REIT (NYSE:WSR)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in WSR 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.
More specifically, Renaissance Technologies was the largest shareholder of Whitestone REIT (NYSE:WSR), with a stake worth $4.9 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $1.8 million. Balyasny Asset Management, Arrowstreet Capital, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position HighVista Strategies allocated the biggest weight to Whitestone REIT (NYSE:WSR), around 0.05% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to WSR.
Seeing as Whitestone REIT (NYSE:WSR) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, David Harding’s Winton Capital Management dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $2.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Whitestone REIT (NYSE:WSR). We will take a look at Liquidity Services, Inc. (NASDAQ:LQDT), Radiant Logistics, Inc. (NYSE:RLGT), Peoples Financial Services Corp. (NASDAQ:PFIS), Berry Corporation (NASDAQ:BRY), Veritone, Inc. (NASDAQ:VERI), Trilogy Metals Inc. (NYSE:TMQ), and CalAmp Corp. (NASDAQ:CAMP). This group of stocks’ market valuations are similar to WSR’s market valuation.
|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 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $9 million in WSR’s case. Liquidity Services, Inc. (NASDAQ:LQDT) is the most popular stock in this table. On the other hand Peoples Financial Services Corp. (NASDAQ:PFIS) is the least popular one with only 1 bullish hedge fund positions. Whitestone REIT (NYSE:WSR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WSR is 57.6. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on WSR as the stock returned 38.2% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.