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In this article we are going to use hedge fund sentiment as a tool and determine whether Brandywine Realty Trust (NYSE:BDN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is BDN a good stock to buy now? Brandywine Realty Trust (NYSE:BDN) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 19. BDN shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 12 hedge funds in our database with BDN holdings at the end of June. Our calculations also showed that BDN 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Frank Brosens of Taconic 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 we're going to take a look at the recent hedge fund action surrounding Brandywine Realty Trust (NYSE:BDN).
Do Hedge Funds Think BDN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in BDN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Brandywine Realty Trust (NYSE:BDN) was held by Millennium Management, which reported holding $6.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $5.3 million position. Other investors bullish on the company included Two Sigma Advisors, Taconic Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Taconic Capital allocated the biggest weight to Brandywine Realty Trust (NYSE:BDN), around 0.11% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to BDN.
Consequently, key money managers were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Brandywine Realty Trust (NYSE:BDN). Balyasny Asset Management had $0.7 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also initiated a $0.2 million position during the quarter. The following funds were also among the new BDN investors: Jinghua Yan's TwinBeech Capital and Parvinder Thiara's Athanor Capital.
Let's check out hedge fund activity in other stocks similar to Brandywine Realty Trust (NYSE:BDN). These stocks are InterDigital, Inc. (NASDAQ:IDCC), Cronos Group Inc. (NASDAQ:CRON), Big Lots, Inc. (NYSE:BIG), Editas Medicine, Inc. (NASDAQ:EDIT), Minerals Technologies Inc (NYSE:MTX), CIT Group Inc. (NYSE:CIT), and Winnebago Industries, Inc. (NYSE:WGO). This group of stocks' market valuations are closest to BDN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IDCC,24,321360,1 CRON,10,59912,-4 BIG,23,123587,1 EDIT,17,89449,-5 MTX,14,94211,-3 CIT,27,262969,0 WGO,28,269965,-5 Average,20.4,174493,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $22 million in BDN's case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 10 bullish hedge fund positions. Brandywine Realty Trust (NYSE:BDN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BDN is 40.2. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on BDN as the stock returned 14% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.