While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Public Storage (NYSE:PSA).
Is Public Storage (NYSE:PSA) undervalued? The best stock pickers were taking a bearish view. The number of bullish hedge fund bets were trimmed by 5 lately. Public Storage (NYSE:PSA) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 31. Our calculations also showed that PSA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 31 hedge funds in our database with PSA positions at the end of the fourth quarter.
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David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s analyze the recent hedge fund action encompassing Public Storage (NYSE:PSA).
Do Hedge Funds Think PSA Is A Good Stock To Buy Now?
At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in PSA 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, Diamond Hill Capital was the largest shareholder of Public Storage (NYSE:PSA), with a stake worth $230.3 million reported as of the end of March. Trailing Diamond Hill Capital was AQR Capital Management, which amassed a stake valued at $172.5 million. Elliott Investment Management, Millennium Management, and Renaissance Technologies 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 Land & Buildings Investment Management allocated the biggest weight to Public Storage (NYSE:PSA), around 10.03% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, dishing out 2.74 percent of its 13F equity portfolio to PSA.
Judging by the fact that Public Storage (NYSE:PSA) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there exists a select few hedgies that slashed their positions entirely last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest investment of the 750 funds watched by Insider Monkey, worth about $12.9 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund dumped about $9.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Public Storage (NYSE:PSA). These stocks are Johnson Controls International plc (NYSE:JCI), Align Technology, Inc. (NASDAQ:ALGN), Ross Stores, Inc. (NASDAQ:ROST), Exelon Corporation (NASDAQ:EXC), TE Connectivity Ltd. (NYSE:TEL), Biogen Inc. (NASDAQ:BIIB), and Palantir Technologies Inc. (NYSE:PLTR). This group of stocks’ market values are similar to PSA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JCI | 41 | 1023861 | 7 |
| ALGN | 49 | 2831496 | -1 |
| ROST | 48 | 976585 | -9 |
| EXC | 44 | 1134135 | 14 |
| TEL | 39 | 2343917 | 0 |
| BIIB | 63 | 2481373 | 0 |
| PLTR | 32 | 1147240 | -6 |
| Average | 45.1 | 1705515 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.1 hedge funds with bullish positions and the average amount invested in these stocks was $1706 million. That figure was $929 million in PSA’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Palantir Technologies Inc. (NYSE:PLTR) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Public Storage (NYSE:PSA) is even less popular than PLTR. Our overall hedge fund sentiment score for PSA is 25.2. 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. Hedge funds clearly dropped the ball on PSA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on PSA as the stock returned 27.2% since Q1 (through July 9th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
