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This Metric Says To Be Wary Of BRT Realty Trust (BRT)

Investing in small-cap stocks has historically been a way to outperform the market, as small-cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller-cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of BRT Realty Trust (NYSE:BRT).

Is BRT Realty Trust (NYSE:BRT) the right investment to pursue these days? The best stock pickers are not buying. The number of bullish hedge fund bets stayed the same, which is a slightly negative development in our experience. BRT Realty Trust (NYSE:BRT) was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article, we will also compare BRT Realty Trust (NYSE: BRT) to other stocks, including Cerulean Pharma Inc (NASDAQ:CERU), Eastern Company (NASDAQ:EML), and Connecture Inc (NASDAQ:CNXR) to get a better sense of its popularity.

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If you’d ask most stock holders, hedge funds are seen as slow, outdated investment vehicles of the past. While there are over 8,000 funds in operation at present, our experts choose to focus on the top tier of this club, around 700 funds. These money managers handle the bulk of all hedge funds’ total capital, and by tracking their highest performing investments, Insider Monkey has spotted several investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to review the recent action encompassing BRT Realty Trust (NYSE:BRT).

What does the smart money think about BRT Realty Trust (NYSE:BRT)?

Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Steve Tannenbaum’s Greenwood Investments has the biggest position in BRT Realty Trust (NYSE:BRT), worth close to $8.6 million, amounting to 8.8% of its total 13F portfolio. Sitting in the number two spot is Royce & Associates, a mutual fund managed by Chuck Royce, which holds a $2.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions consist of Michael Price’s MFP Investors, and Renaissance Technologies.

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 haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to BRT Realty Trust (NYSE:BRT). These stocks are Cerulean Pharma Inc (NASDAQ:CERU), Eastern Company (NASDAQ:EML), Connecture Inc (NASDAQ:CNXR), and Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP). All of these stocks’ market caps resemble BRT Realty Trust (NYSE:BRT)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CERU 6 5540 -1
EML 4 8797 -2
CNXR 11 31416 2
TNXP 13 33793 0

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $13 million in BRT Realty Trust (NYSE:BRT)’s case. Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) is the most popular stock in this table. On the other hand, Eastern Company (NASDAQ:EML) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, BRT Realty Trust (NYSE:BRT) is even less popular than Eastern Company (NASDAQ:EML). 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.

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