Stag Industrial Inc (STAG): Are Hedge Funds Right About This Stock?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Stag Industrial Inc (NYSE:STAG).

Stag Industrial Inc (NYSE:STAG) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September. 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 Impax Laboratories Inc (NASDAQ:IPXL), Brady Corp (NYSE:BRC), and VeriFone Systems Inc (NYSE:PAY) to gather more data points.

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, we’re going to take a glance at the key action encompassing Stag Industrial Inc (NYSE:STAG).

Hedge fund activity in Stag Industrial Inc (NYSE:STAG)

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in STAG heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, J. Alan Reid, Jr.’s Forward Management has the biggest position in Stag Industrial Inc (NYSE:STAG), worth close to $33.5 million, corresponding to 2.5% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, one of the largest hedge funds in the world, with a $14.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish contain Michael Swotes’ Castle Ridge Investment Management, and Cliff Asness’ AQR Capital Management. We should note that Forward Management is 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.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions either. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks similar to Stag Industrial Inc (NYSE:STAG). We will take a look at Impax Laboratories Inc (NASDAQ:IPXL), Brady Corp (NYSE:BRC), VeriFone Systems Inc (NYSE:PAY), and Wix.Com Ltd (NASDAQ:WIX). All of these stocks’ market caps are similar to STAG’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $60 million in STAG’s case. Wix.Com Ltd (NASDAQ:WIX) is the most popular stock in this table. On the other hand Impax Laboratories Inc (NASDAQ:IPXL) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Stag Industrial Inc (NYSE:STAG) is even less popular than IPXL. 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.