With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Clipper Realty Inc. (NYSE:CLPR).
Clipper Realty Inc. (NYSE:CLPR) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare CLPR to other stocks including RADA Electronic Industries Ltd. (NASDAQ:RADA), Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), and C&F Financial Corp (NASDAQ:CFFI) to get a better sense of its popularity. Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the latest hedge fund action surrounding Clipper Realty Inc. (NYSE:CLPR).
What have hedge funds been doing with Clipper Realty Inc. (NYSE:CLPR)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CLPR over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Indaba Capital Management was the largest shareholder of Clipper Realty Inc. (NYSE:CLPR), with a stake worth $17.8 million reported as of the end of September. Trailing Indaba Capital Management was Forward Management, which amassed a stake valued at $9.8 million. Park West Asset Management, Renaissance Technologies, and Nut Tree Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Clipper Realty Inc. (NYSE:CLPR), around 4.15% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, earmarking 1.49 percent of its 13F equity portfolio to CLPR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Winton Capital Management).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Clipper Realty Inc. (NYSE:CLPR) but similarly valued. These stocks are RADA Electronic Industries Ltd. (NASDAQ:RADA), Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), C&F Financial Corp (NASDAQ:CFFI), and GNC Holdings Inc (NYSE:GNC). This group of stocks' market values resemble CLPR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RADA,2,3466,-1 ELOX,3,1869,1 CFFI,3,8008,1 GNC,10,15157,0 Average,4.5,7125,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $37 million in CLPR's case. GNC Holdings Inc (NYSE:GNC) is the most popular stock in this table. On the other hand RADA Electronic Industries Ltd. (NASDAQ:RADA) is the least popular one with only 2 bullish hedge fund positions. Clipper Realty Inc. (NYSE:CLPR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CLPR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CLPR were disappointed as the stock returned -11.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.