At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Brandywine Realty Trust (NYSE:BDN) undervalued? Prominent investors are betting on the stock. The number of bullish hedge fund positions rose by 2 recently. Our calculations also showed that bdn isn't among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
We're going to go over the latest hedge fund action surrounding Brandywine Realty Trust (NYSE:BDN).
What have hedge funds been doing with Brandywine Realty Trust (NYSE:BDN)?
Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in BDN at the beginning of this year. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Brandywine Realty Trust (NYSE:BDN), which was worth $52.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $29.7 million worth of shares. Moreover, Balyasny Asset Management, Renaissance Technologies, and Two Sigma Advisors were also bullish on Brandywine Realty Trust (NYSE:BDN), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have jumped into Brandywine Realty Trust (NYSE:BDN) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, created the largest position in Brandywine Realty Trust (NYSE:BDN). Tudor Investment Corp had $0.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new BDN position is George Zweig, Shane Haas and Ravi Chander's Signition LP.
Let's now take a look at hedge fund activity in other stocks similar to Brandywine Realty Trust (NYSE:BDN). We will take a look at Colony Credit Real Estate, Inc. (NYSE:CLNC), Golar LNG Limited (NASDAQ:GLNG), Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (NASDAQ:OMAB), and Korn/Ferry International (NYSE:KFY). This group of stocks' market caps resemble BDN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLNC,4,4238,2 GLNG,34,651684,2 OMAB,5,38025,1 KFY,20,119253,-1 Average,15.75,203300,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $122 million in BDN's case. Golar LNG Limited (NASDAQ:GLNG) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 4 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. In this regard GLNG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.