Where Do Hedge Funds Stand On City Office REIT Inc (CIO)?

In this article we will analyze whether City Office REIT Inc (NYSE:CIO) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is City Office REIT Inc (NYSE:CIO) the right pick for your portfolio? Prominent investors were betting on the stock. The number of long hedge fund bets went up by 2 in recent months. City Office REIT Inc (NYSE:CIO) was in 15 hedge funds’ portfolios at the end of September. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CIO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 13 hedge funds in our database with CIO positions at the end of the second quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s review the fresh hedge fund action surrounding City Office REIT Inc (NYSE:CIO).

Do Hedge Funds Think CIO Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CIO over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in City Office REIT Inc (NYSE:CIO), which was worth $19 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $2.1 million worth of shares. AQR Capital Management, D E Shaw, and Millennium Management 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 Marathon Asset Management allocated the biggest weight to City Office REIT Inc (NYSE:CIO), around 0.34% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to CIO.

With a general bullishness amongst the heavyweights, specific money managers have jumped into City Office REIT Inc (NYSE:CIO) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the largest position in City Office REIT Inc (NYSE:CIO). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.1 million position during the quarter. The other funds with brand new CIO positions are Michael Gelband’s ExodusPoint Capital and Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as City Office REIT Inc (NYSE:CIO) but similarly valued. These stocks are Blink Charging Co. (NASDAQ:BLNK), Seneca Foods Corp (NASDAQ:SENEA), Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), China Distance Education Hldgs Ltd (NYSE:DL), AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), Genesco Inc. (NYSE:GCO), and Craft Brew Alliance Inc (NASDAQ:BREW). This group of stocks’ market values are closest to CIO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLNK 5 12486 3
SENEA 11 32029 2
AOSL 11 37899 1
DL 3 6280 0
AMAG 11 139323 -3
GCO 13 21117 0
BREW 11 43900 -4
Average 9.3 41862 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $29 million in CIO’s case. Genesco Inc. (NYSE:GCO) is the most popular stock in this table. On the other hand China Distance Education Hldgs Ltd (NYSE:DL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks City Office REIT Inc (NYSE:CIO) is more popular among hedge funds. Our overall hedge fund sentiment score for CIO is 87. 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. 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 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on CIO as the stock returned 30.9% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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