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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Camden Property Trust (NYSE:CPT) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Camden Property Trust (NYSE:CPT) was in 32 hedge funds' portfolios at the end of the first quarter of 2020. CPT has experienced an increase in hedge fund interest lately. There were 31 hedge funds in our database with CPT holdings at the end of the previous quarter. Our calculations also showed that CPT isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
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Charles Davidson of Wexford Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the new hedge fund action surrounding Camden Property Trust (NYSE:CPT).
How have hedgies been trading Camden Property Trust (NYSE:CPT)?
Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the fourth quarter of 2019. By comparison, 24 hedge funds held shares or bullish call options in CPT a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Israel Englander's Millennium Management has the largest position in Camden Property Trust (NYSE:CPT), worth close to $62 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $44.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Charles Fitzgerald's V3 Capital, D. E. Shaw's D E Shaw and Eduardo Abush's Waterfront Capital Partners. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to Camden Property Trust (NYSE:CPT), around 8.48% of its 13F portfolio. V3 Capital is also relatively very bullish on the stock, designating 8.1 percent of its 13F equity portfolio to CPT.
As one would reasonably expect, key money managers were breaking ground themselves. V3 Capital, managed by Charles Fitzgerald, initiated the biggest position in Camden Property Trust (NYSE:CPT). V3 Capital had $37 million invested in the company at the end of the quarter. Jonathan Litt's Land & Buildings Investment Management also made a $21 million investment in the stock during the quarter. The following funds were also among the new CPT investors: John Khoury's Long Pond Capital, Greg Poole's Echo Street Capital Management, and Charles Davidson and Joseph Jacobs's Wexford Capital.
Let's also examine hedge fund activity in other stocks similar to Camden Property Trust (NYSE:CPT). We will take a look at Expedia Group Inc (NASDAQ:EXPE), Crown Holdings, Inc. (NYSE:CCK), Zscaler, Inc. (NASDAQ:ZS), and Everest Re Group Ltd (NYSE:RE). This group of stocks' market valuations resemble CPT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPE,41,1550595,-18 CCK,56,1217305,-2 ZS,27,274887,9 RE,27,558232,3 Average,37.75,900255,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $900 million. That figure was $362 million in CPT's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Zscaler, Inc. (NASDAQ:ZS) is the least popular one with only 27 bullish hedge fund positions. Camden Property Trust (NYSE:CPT) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately CPT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CPT investors were disappointed as the stock returned 16.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.