Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 12.1% in 2019 (through May 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 18.7% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Brandywine Realty Trust (NYSE:BDN).
Is Brandywine Realty Trust (NYSE:BDN) a good investment right now? Prominent investors are becoming less hopeful. The number of long hedge fund bets decreased by 2 in recent months. Our calculations also showed that bdn isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the recent hedge fund action encompassing Brandywine Realty Trust (NYSE:BDN).
Hedge fund activity in Brandywine Realty Trust (NYSE:BDN)
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 -12% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BDN over the last 15 quarters. So, let's check out 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 $30.2 million worth of stock at the end of March. It was followed by Waterfront Capital Partners with a $21.1 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Two Sigma Advisors.
Judging by the fact that Brandywine Realty Trust (NYSE:BDN) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers that slashed their positions entirely heading into Q3. It's worth mentioning that David Costen Haley's HBK Investments dumped the largest position of the "upper crust" of funds followed by Insider Monkey, totaling about $0.7 million in stock, and Bruce Kovner's Caxton Associates LP was right behind this move, as the fund dropped about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Brandywine Realty Trust (NYSE:BDN) but similarly valued. These stocks are Box, Inc. (NYSE:BOX), GATX Corporation (NYSE:GATX), Noah Holdings Limited (NYSE:NOAH), and Pan American Silver Corp. (NASDAQ:PAAS). 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 BOX,32,472060,8 GATX,11,239346,-3 NOAH,14,253895,3 PAAS,17,212637,2 Average,18.5,294485,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $129 million in BDN's case. Box, Inc. (NYSE:BOX) is the most popular stock in this table. On the other hand GATX Corporation (NYSE:GATX) is the least popular one with only 11 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. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BDN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BDN investors were disappointed as the stock returned -2.3% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.