2019 Review: Most Favored Hedge Fund Stocks vs. Vornado Realty Trust (VNO)
We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Vornado Realty Trust (NYSE:VNO) investors should pay attention to an increase in support from the world's most elite money managers lately. Our calculations also showed that VNO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
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Paul Singer of Elliott Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to take a look at the fresh hedge fund action encompassing Vornado Realty Trust (NYSE:VNO).
What have hedge funds been doing with Vornado Realty Trust (NYSE:VNO)?
Heading into the fourth quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VNO over the last 17 quarters. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Vornado Realty Trust (NYSE:VNO) was held by Long Pond Capital, which reported holding $335 million worth of stock at the end of September. It was followed by Elliott Management with a $95.5 million position. Other investors bullish on the company included Winton Capital Management, Third Avenue Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to Vornado Realty Trust (NYSE:VNO), around 8.74% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, earmarking 3.57 percent of its 13F equity portfolio to VNO.
As one would reasonably expect, key hedge funds were breaking ground themselves. Waterfront Capital Partners, managed by Eduardo Abush, established the biggest position in Vornado Realty Trust (NYSE:VNO). Waterfront Capital Partners had $12.7 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $7.9 million investment in the stock during the quarter. The other funds with brand new VNO positions are Richard Driehaus's Driehaus Capital, Alec Litowitz and Ross Laser's Magnetar Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's go over hedge fund activity in other stocks similar to Vornado Realty Trust (NYSE:VNO). These stocks are BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Lincoln National Corporation (NYSE:LNC), Masco Corporation (NYSE:MAS), and American Airlines Group Inc (NASDAQ:AAL). All of these stocks' market caps resemble VNO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BMRN,45,1621801,0 LNC,34,1142033,-1 MAS,46,1007912,1 AAL,38,1781432,4 Average,40.75,1388295,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $1388 million. That figure was $725 million in VNO's case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand Lincoln National Corporation (NYSE:LNC) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Vornado Realty Trust (NYSE:VNO) is even less popular than LNC. Hedge funds dodged a bullet by taking a bearish stance towards VNO. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately VNO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VNO investors were disappointed as the stock returned 12.5% in 2019 (through December 23rd) 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 65 percent of these stocks already outperformed the market in 2019.
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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