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Should You Buy Caretrust REIT Inc (CTRE)?

How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Caretrust REIT Inc (NASDAQ:CTRE).

Caretrust REIT Inc (NASDAQ:CTRE) is a real estate investment trust specialized in healthcare facilities. The stock has lost around 10% year-to-date and sports a dividend yield of 5.62%. Among the funds we track, Caretrust is not a very popular stock, but it did register an increase in the number of invested funds during the third quarter. However, The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Renewable Energy Group Inc (NASDAQ:REGI), Park Electrochemical Corp. (NYSE:PKE), and Gain Capital Holdings Inc (NYSE:GCAP) to gather more data points.

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At the moment there are dozens of indicators stock market investors employ to analyze their stock investments. A couple of the most under-the-radar indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outperform their index-focused peers by a very impressive amount (see the details here).

With all of this in mind, we’re going to take a gander at the key action regarding Caretrust REIT Inc (NASDAQ:CTRE).

What does the smart money think about Caretrust REIT Inc (NASDAQ:CTRE)?

At the Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 80% from the second quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Moab Capital Partners, managed by Michael M. Rothenberg, holds the number one position in Caretrust REIT Inc (NASDAQ:CTRE). Moab Capital Partners has a $16 million position in the stock, comprising 5.6% of its 13F portfolio. On Moab Capital Partners’s heels is Balyasny Asset Management, led by Dmitry Balyasny, holding a $6.3 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions include D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management, and David Brown’s Hawk Ridge Management.

Some of the aforementioned funds initiated their stakes during the third quarter. Moab Capital Partners, established the biggest position in Caretrust REIT Inc (NASDAQ:CTRE). Balyasny Asset Management also initiated its stake during the same period. The other funds with brand new CTRE positions are Hawk Ridge Management, Jacob Gottlieb’s Visium Asset Management, and Ken Griffin’s Citadel Investment Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Caretrust REIT Inc (NASDAQ:CTRE) but similarly valued. We will take a look at Renewable Energy Group Inc (NASDAQ:REGI), Park Electrochemical Corp. (NYSE:PKE), Gain Capital Holdings Inc (NYSE:GCAP), and Clifton Savings Bancorp, Inc. (NASDAQ:CSBK). This group of stocks’ market valuations resemble CTRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REGI 10 47279 -5
PKE 7 70281 -3
GCAP 17 48092 1
CSBK 11 44743 0

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $30 million in CTRE’s case. Gain Capital Holdings Inc (NYSE:GCAP) is the most popular stock in this table. On the other hand Park Electrochemical Corp. (NYSE:PKE) is the least popular one with only 7 bullish hedge fund positions. Caretrust REIT Inc (NASDAQ:CTRE) 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 GCAP might be a better candidate to consider a long position.

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