Were Hedge Funds Right About American Finance Trust (AFIN)?

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards American Finance Trust, Inc. (NASDAQ:AFIN).

Is American Finance Trust, Inc. (NASDAQ:AFIN) an excellent investment today? Money managers are becoming less confident. The number of bullish hedge fund positions shrunk by 1 recently. Our calculations also showed that AFIN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).


Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the fresh hedge fund action regarding American Finance Trust, Inc. (NASDAQ:AFIN).

What does smart money think about American Finance Trust, Inc. (NASDAQ:AFIN)?

At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the third quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in AFIN a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is AFIN A Good Stock To Buy?

The largest stake in American Finance Trust, Inc. (NASDAQ:AFIN) was held by Renaissance Technologies, which reported holding $9.2 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $8.5 million position. Other investors bullish on the company included Citadel Investment Group, ExodusPoint Capital, and D E Shaw. In terms of the portfolio weights assigned to each position ExodusPoint Capital allocated the biggest weight to American Finance Trust, Inc. (NASDAQ:AFIN), around 0.02% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to AFIN.

Because American Finance Trust, Inc. (NASDAQ:AFIN) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedgies that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Minhua Zhang’s Weld Capital Management cut the biggest position of the 750 funds tracked by Insider Monkey, worth close to $0.2 million in stock, and Ran Pang’s Quantamental Technologies was right behind this move, as the fund dumped about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to American Finance Trust, Inc. (NASDAQ:AFIN). These stocks are TriMas Corp (NASDAQ:TRS), Victory Capital Holdings, Inc. (NASDAQ:VCTR), Hudson Ltd. (NYSE:HUD), and Universal Corp (NYSE:UVV). This group of stocks’ market values are closest to AFIN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRS 15 113854 0
VCTR 7 73385 -5
HUD 10 38953 -2
UVV 14 116152 -2
Average 11.5 85586 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $25 million in AFIN’s case. TriMas Corp (NASDAQ:TRS) is the most popular stock in this table. On the other hand Victory Capital Holdings, Inc. (NASDAQ:VCTR) is the least popular one with only 7 bullish hedge fund positions. American Finance Trust, Inc. (NASDAQ:AFIN) 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately AFIN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AFIN investors were disappointed as the stock returned -40.6% during the same time period 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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