Should You Buy Equity Lifestyle Properties, Inc. (ELS)?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Equity Lifestyle Properties, Inc. (NYSE:ELS) from the perspective of those elite funds.

Equity Lifestyle Properties, Inc. (NYSE:ELS) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of September. At the end of this article we will also compare ELS to other stocks including Formula One Group (NASDAQ:FWONK), FactSet Research Systems Inc. (NYSE:FDS), and Herbalife Nutrition Ltd. (NYSE:HLF) to get a better sense of its popularity.

To most traders, hedge funds are assumed to be unimportant, old investment tools of years past. While there are over 8,000 funds in operation at present, We choose to focus on the bigwigs of this club, approximately 700 funds. These investment experts orchestrate bulk of the smart money’s total asset base, and by keeping track of their matchless investments, Insider Monkey has discovered a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by 6 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Blair Levinsky of Waratah Capital Advisors

We’re going to take a peek at the key hedge fund action regarding Equity Lifestyle Properties, Inc. (NYSE:ELS).

Hedge fund activity in Equity Lifestyle Properties, Inc. (NYSE:ELS)

Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, no change from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ELS over the last 13 quarters. So, let’s examine 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 Equity Lifestyle Properties, Inc. (NYSE:ELS), with a stake worth $305.7 million reported as of the end of September. Trailing Renaissance Technologies was AEW Capital Management, which amassed a stake valued at $56.4 million. D E Shaw, Waratah Capital Advisors, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Because Equity Lifestyle Properties, Inc. (NYSE:ELS) has witnessed falling interest from hedge fund managers, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes heading into Q3. At the top of the heap, Richard Driehaus’s Driehaus Capital sold off the largest investment of the 700 funds followed by Insider Monkey, comprising close to $3.5 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its call options, about $0.6 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Equity Lifestyle Properties, Inc. (NYSE:ELS) but similarly valued. These stocks are Formula One Group (NASDAQ:FWONK), FactSet Research Systems Inc. (NYSE:FDS), Herbalife Nutrition Ltd. (NYSE:HLF), and Zayo Group Holdings Inc (NYSE:ZAYO). This group of stocks’ market caps resemble ELS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FWONK 39 2195969 0
FDS 17 208884 -1
HLF 38 3764011 8
ZAYO 55 1994980 8
Average 37.25 2040961 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $2.04 billion. That figure was $528 million in ELS’s case. Zayo Group Holdings Inc (NYSE:ZAYO) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Equity Lifestyle Properties, Inc. (NYSE:ELS) is even less popular than FDS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None. This article was originally published at Insider Monkey.