In this article we will check out the progression of hedge fund sentiment towards American Assets Trust, Inc (NYSE:AAT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
American Assets Trust, Inc (NYSE:AAT) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds' portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as SAGE Therapeutics Inc (NASDAQ:SAGE), PQ Group Holdings Inc. (NYSE:PQG), and Trustmark Corp (NASDAQ:TRMK) to gather more data points. Our calculations also showed that AAT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 easiest car rental companies to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's go over the key hedge fund action encompassing American Assets Trust, Inc (NYSE:AAT).
What does smart money think about American Assets Trust, Inc (NYSE:AAT)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in AAT a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Israel Englander's Millennium Management has the largest position in American Assets Trust, Inc (NYSE:AAT), worth close to $11.3 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Balyasny Asset Management, led by Dmitry Balyasny, holding a $7.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of David Harding's Winton Capital Management, Renaissance Technologies and Paul Tudor Jones's Tudor Investment Corp. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to American Assets Trust, Inc (NYSE:AAT), around 0.28% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to AAT.
Judging by the fact that American Assets Trust, Inc (NYSE:AAT) has witnessed declining sentiment from the smart money, logic holds that there is a sect of funds that slashed their positions entirely by the end of the first quarter. Interestingly, Noam Gottesman's GLG Partners said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $1.7 million in stock. Gavin Saitowitz and Cisco J. del Valle's fund, Springbok Capital, also dropped its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as American Assets Trust, Inc (NYSE:AAT) but similarly valued. These stocks are SAGE Therapeutics Inc (NASDAQ:SAGE), PQ Group Holdings Inc. (NYSE:PQG), Trustmark Corp (NASDAQ:TRMK), and Onto Innovation Inc. (NYSE:ONTO). This group of stocks' market caps match AAT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAGE,30,257910,-5 PQG,7,36427,3 TRMK,13,11558,-3 ONTO,11,123006,-3 Average,15.25,107225,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $33 million in AAT's case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 7 bullish hedge fund positions. American Assets Trust, Inc (NYSE:AAT) 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately AAT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AAT investors were disappointed as the stock returned 12.4% during the second quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.