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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Easterly Government Properties Inc (NYSE:DEA) in this article.
Is DEA a good stock to buy now? Investors who are in the know were becoming less confident. The number of bullish hedge fund positions fell by 2 recently. Easterly Government Properties Inc (NYSE:DEA) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. Our calculations also showed that DEA 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.
Dmitry Balyasny of Balyasny Asset Management
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 check out the key hedge fund action encompassing Easterly Government Properties Inc (NYSE:DEA).
Do Hedge Funds Think DEA Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DEA over the last 21 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 Easterly Government Properties Inc (NYSE:DEA) was held by V3 Capital, which reported holding $78.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $15.1 million position. Other investors bullish on the company included Balyasny Asset Management, Winton Capital Management, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position V3 Capital allocated the biggest weight to Easterly Government Properties Inc (NYSE:DEA), around 17.87% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, setting aside 0.48 percent of its 13F equity portfolio to DEA.
Judging by the fact that Easterly Government Properties Inc (NYSE:DEA) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of funds that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Michael Gelband's ExodusPoint Capital sold off the largest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $1.2 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dumped about $1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Easterly Government Properties Inc (NYSE:DEA) but similarly valued. We will take a look at Hilton Grand Vacations Inc. (NYSE:HGV), B&G Foods, Inc. (NYSE:BGS), Dana Incorporated (NYSE:DAN), Empire State Realty Trust Inc (NYSE:ESRT), Herman Miller, Inc. (NASDAQ:MLHR), Commscope Holding Company Inc (NASDAQ:COMM), and CNX Resources Corporation (NYSE:CNX). This group of stocks' market caps are similar to DEA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HGV,32,575867,2 BGS,15,37658,2 DAN,22,163106,-3 ESRT,17,161290,-2 MLHR,23,121547,1 COMM,30,482875,-2 CNX,33,581481,5 Average,24.6,303403,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $303 million. That figure was $128 million in DEA's case. CNX Resources Corporation (NYSE:CNX) is the most popular stock in this table. On the other hand B&G Foods, Inc. (NYSE:BGS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Easterly Government Properties Inc (NYSE:DEA) is even less popular than BGS. Our overall hedge fund sentiment score for DEA is 29. 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. Hedge funds dodged a bullet by taking a bearish stance towards DEA. Our calculations showed that the top 20 most popular hedge fund stocks 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 but managed to beat the market again by 16.2 percentage points. Unfortunately DEA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DEA investors were disappointed as the stock returned -1.8% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.