Physicians Realty Trust (DOC): Are Hedge Funds Right About This Stock?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Physicians Realty Trust (NYSE:DOC).

At the end of September, there were 17 funds tracked by Insider Monkey bullish on Physicians Realty Trust. The company saw a decline in hedge fund interest last quarter, as the company had been included in the equity portfolios of 20 funds at the end of June. At the end of this article we will also compare DOC to other stocks including Prospect Capital Corporation (NASDAQ:PSEC), Chicago Bridge & Iron Company N.V. (NYSE:CBI), and Littelfuse, Inc. (NASDAQ:LFUS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s review the fresh action encompassing Physicians Realty Trust (NYSE:DOC).

How are hedge funds trading Physicians Realty Trust (NYSE:DOC)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in Physicians Realty Trust, which represents a decline of 15% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in DOC over the last five quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ardsley Partners, led by Philip Hempleman, holds the number one position in Physicians Realty Trust (NYSE:DOC). Ardsley Partners has a $11.1 million position in the stock, comprising 1.8% of its 13F portfolio. The second most bullish fund manager is Eduardo Abush’s Waterfront Capital Partners, with a $9.9 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Amy Minella’s Cardinal Capital, Glenn Russell Dubin’s Highbridge Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cashed in their entire stakes in the stock during the third quarter. Intriguingly, Michael Swotes’ Castle Ridge Investment Management cashed in the largest investment of all the investors tracked by Insider Monkey, comprising an estimated $4.9 million in stock, and Jim Simons’ Renaissance Technologies was right behind this move, as the fund dumped about $4.5 million worth of shares.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Physicians Realty Trust (NYSE:DOC) but similarly valued. We will take a look at Prospect Capital Corporation (NASDAQ:PSEC), Chicago Bridge & Iron Company N.V. (NYSE:CBI), Littelfuse, Inc. (NASDAQ:LFUS), and Zendesk Inc (NYSE:ZEN). This group of stocks’ market valuations resemble DOC’s market valuation.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $65 million in DOC’s case. Chicago Bridge & Iron Company N.V. (NYSE:CBI) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 13 funds holding shares. Physicians Realty Trust (NYSE:DOC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Chicago Bridge & Iron Company N.V. (NYSE:CBI) might be a better candidate to consider taking a long position in.

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Disclosure: None