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Sun Communities Inc (SUI): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Sun Communities Inc (NYSE:SUI).

Is Sun Communities Inc (NYSE:SUI) a buy right now? Money managers are becoming less confident. The number of bullish hedge fund positions shrunk by 3 lately. Our calculations also showed that SUI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the recent hedge fund action surrounding Sun Communities Inc (NYSE:SUI).

How are hedge funds trading Sun Communities Inc (NYSE:SUI)?

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the fourth quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in SUI a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is SUI A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Sun Communities Inc (NYSE:SUI), which was worth $83.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $66.2 million worth of shares. Waratah Capital Advisors, Zimmer Partners, and Waterfront Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to Sun Communities Inc (NYSE:SUI), around 8.59% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, earmarking 3.45 percent of its 13F equity portfolio to SUI.

Judging by the fact that Sun Communities Inc (NYSE:SUI) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Ran Pang’s Quantamental Technologies dropped the largest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $1.1 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Sun Communities Inc (NYSE:SUI). These stocks are Pioneer Natural Resources Company (NYSE:PXD), Invitation Homes Inc. (NYSE:INVH), Ryanair Holdings plc (NASDAQ:RYAAY), and Arch Capital Group Ltd. (NASDAQ:ACGL). This group of stocks’ market values match SUI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PXD 40 534807 -13
INVH 27 562992 -6
RYAAY 22 550561 0
ACGL 33 733577 10
Average 30.5 595484 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $323 million in SUI’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 22 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. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 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 9.9% during the second quarter 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.