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Were Hedge Funds Right About Arbor Realty Trust, Inc. (ABR)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Arbor Realty Trust, Inc. (NYSE:ABR)?

Arbor Realty Trust, Inc. (NYSE:ABR) has seen an increase in hedge fund sentiment recently. Our calculations also showed that ABR 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).

To most shareholders, hedge funds are assumed to be unimportant, old financial vehicles of years past. While there are over 8000 funds trading at present, We hone in on the moguls of this group, approximately 850 funds. These investment experts command the majority of the smart money’s total capital, and by following their highest performing stock picks, Insider Monkey has brought to light a number of investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

OMEGA ADVISORS

Leon Cooperman of Omega Advisors

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. 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 we’re going to take a glance at the key hedge fund action surrounding Arbor Realty Trust, Inc. (NYSE:ABR).

What have hedge funds been doing with Arbor Realty Trust, Inc. (NYSE:ABR)?

At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ABR over the last 18 quarters. So, let’s review 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, Omega Advisors, managed by Leon Cooperman, holds the most valuable position in Arbor Realty Trust, Inc. (NYSE:ABR). Omega Advisors has a $34.4 million position in the stock, comprising 1.8% of its 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $22.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Ken Griffin’s Citadel Investment Group and Renaissance Technologies. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to Arbor Realty Trust, Inc. (NYSE:ABR), around 1.83% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 1.03 percent of its 13F equity portfolio to ABR.

As one would reasonably expect, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Arbor Realty Trust, Inc. (NYSE:ABR). Point72 Asset Management had $3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Mika Toikka’s AlphaCrest Capital Management, and Bruce Kovner’s Caxton Associates LP.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Arbor Realty Trust, Inc. (NYSE:ABR) but similarly valued. We will take a look at Youdao, Inc. (NYSE:DAO), Chesapeake Utilities Corporation (NYSE:CPK), KEMET Corporation (NYSE:KEM), and Brinker International, Inc. (NYSE:EAT). All of these stocks’ market caps are closest to ABR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DAO 3 3663 3
CPK 8 35601 -1
KEM 21 191537 1
EAT 21 181122 -8
Average 13.25 102981 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $117 million in ABR’s case. KEMET Corporation (NYSE:KEM) is the most popular stock in this table. On the other hand Youdao, Inc. (NYSE:DAO) is the least popular one with only 3 bullish hedge fund positions. Arbor Realty Trust, Inc. (NYSE:ABR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately ABR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ABR were disappointed as the stock returned -64.4% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.

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