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Should You Avoid SL Green Realty Corp (SLG)?: DDR Corp (DDR), Kimco Realty Corp (KIM)

SL Green Realty Corp (NYSE:SLG) was in 13 hedge funds’ portfolio at the end of the fourth quarter of 2012. SLG has experienced a decrease in enthusiasm from smart money recently. There were 13 hedge funds in our database with SLG holdings at the end of the previous quarter.

3 REIT Preferred Stocks for Yield-Hungry InvestorsIn the eyes of most traders, hedge funds are seen as unimportant, old investment tools of the past. While there are over 8000 funds with their doors open at present, we hone in on the bigwigs of this club, around 450 funds. It is estimated that this group controls the majority of the hedge fund industry’s total capital, and by watching their highest performing investments, we have revealed a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Equally as key, optimistic insider trading activity is another way to break down the stock market universe. Just as you’d expect, there are a number of incentives for an upper level exec to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this method if “monkeys” understand where to look (learn more here).

With all of this in mind, let’s take a glance at the latest action regarding SL Green Realty Corp (NYSE:SLG).

How are hedge funds trading SL Green Realty Corp (NYSE:SLG)?

In preparation for this year, a total of 13 of the hedge funds we track held long positions in this stock, a change of 0% from the third quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings significantly.

When looking at the hedgies we track, Millennium Management, managed by Israel Englander, holds the most valuable position in SL Green Realty Corp (NYSE:SLG). Millennium Management has a $12 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which held a $9 million position; the fund has 0% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Robert Jaffe’s Force Capital, Jim Simons’s Renaissance Technologies and Clint Carlson’s Carlson Capital.

Because SL Green Realty Corp (NYSE:SLG) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there were a few money managers who were dropping their positions entirely heading into 2013. At the top of the heap, Ken Heebner’s Capital Growth Management dumped the biggest stake of the 450+ funds we key on, valued at about $116 million in stock., and SAC Subsidiary of Sigma Capital Management was right behind this move, as the fund dumped about $7 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading SL Green Realty Corp (NYSE:SLG)?

Insider purchases made by high-level executives is most useful when the company we’re looking at has experienced transactions within the past six months. Over the last six-month time frame, SL Green Realty Corp (NYSE:SLG) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to SL Green Realty Corp (NYSE:SLG). These stocks are DDR Corp (NYSE:DDR), Kimco Realty Corp (NYSE:KIM), Macerich Co (NYSE:MAC), Federal Realty Investment Trust (NYSE:FRT), and Realty Income Corp (NYSE:O). This group of stocks are in the reit – retail industry and their market caps match SLG’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
DDR Corp (NYSE:DDR) 9 0 7
Kimco Realty Corp (NYSE:KIM) 11 0 4
Macerich Co (NYSE:MAC) 9 2 4
Federal Realty Investment Trust (NYSE:FRT) 12 0 2
Realty Income Corp (NYSE:O) 6 0 6

With the returns demonstrated by Insider Monkey’s tactics, retail investors must always keep an eye on hedge fund and insider trading activity, and SL Green Realty Corp (NYSE:SLG) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.