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Sun Communities Inc (SUI): Hedge Funds Are Nibbling

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Sun Communities Inc (NYSE:SUI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Sun Communities Inc (NYSE:SUI) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. SUI shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. There were 28 hedge funds in our database with SUI holdings at the end of March. Our calculations also showed that SUI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Heebner of Capital Growth Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s check out the new hedge fund action regarding Sun Communities Inc (NYSE:SUI).

Hedge fund activity in Sun Communities Inc (NYSE:SUI)

At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in SUI a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Sun Communities Inc (NYSE:SUI) was held by Echo Street Capital Management, which reported holding $76.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $71.4 million position. Other investors bullish on the company included Senator Investment Group, Millennium Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Sun Communities Inc (NYSE:SUI), around 4.24% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, designating 3.5 percent of its 13F equity portfolio to SUI.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the largest position in Sun Communities Inc (NYSE:SUI). Senator Investment Group had $67.8 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $20.6 million investment in the stock during the quarter. The following funds were also among the new SUI investors: Ken Grossman and Glen Schneider’s SG Capital Management, Clint Carlson’s Carlson Capital, and Ken Heebner’s Capital Growth Management.

Let’s now review hedge fund activity in other stocks similar to Sun Communities Inc (NYSE:SUI). We will take a look at Magna International Inc. (NYSE:MGA), Leidos Holdings Inc (NYSE:LDOS), Wix.Com Ltd (NASDAQ:WIX), Masco Corporation (NYSE:MAS), The Liberty SiriusXM Group (NASDAQ:LSXMA), Western Digital Corporation (NASDAQ:WDC), and MongoDB, Inc. (NASDAQ:MDB). This group of stocks’ market valuations are closest to SUI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGA 19 467472 -3
LDOS 35 617234 5
WIX 27 1258178 -2
MAS 40 827096 6
LSXMA 46 1294569 -2
WDC 49 583698 4
MDB 37 1248081 7
Average 36.1 899475 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $899 million. That figure was $436 million in SUI’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 19 bullish hedge fund positions. Sun Communities Inc (NYSE:SUI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SUI is 54.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately SUI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SUI investors were disappointed as the stock returned 8.6% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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