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Did Hedge Funds Make The Right Call On First Industrial Realty Trust, Inc. (FR) ?

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Debasis Saha
·6 min read
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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding First Industrial Realty Trust, Inc. (NYSE:FR) and determine whether hedge funds had an edge regarding this stock.

Is First Industrial Realty Trust, Inc. (NYSE:FR) the right pick for your portfolio? Hedge funds were in a bullish mood. The number of bullish hedge fund positions increased by 5 in recent months. Our calculations also showed that FR 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). FR was in 24 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with FR positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a large number of gauges market participants have at their disposal to appraise their holdings. A couple of the most innovative gauges are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outpace their index-focused peers by a solid margin (see the details here).

Izzy Englander of MILLENNIUM MANAGEMENT
Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like "the Starbucks of cannabis" to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let's check out the recent hedge fund action regarding First Industrial Realty Trust, Inc. (NYSE:FR).

What does smart money think about First Industrial Realty Trust, Inc. (NYSE:FR)?

At Q1's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in FR a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FR A Good Stock To Buy?
Is FR A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Long Pond Capital, managed by John Khoury, holds the biggest position in First Industrial Realty Trust, Inc. (NYSE:FR). Long Pond Capital has a $75.7 million position in the stock, comprising 3.9% of its 13F portfolio. The second largest stake is held by Waterfront Capital Partners, managed by Eduardo Abush, which holds a $36.9 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Renaissance Technologies, Ken Griffin's Citadel Investment Group and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to First Industrial Realty Trust, Inc. (NYSE:FR), around 4.53% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, earmarking 3.88 percent of its 13F equity portfolio to FR.

Consequently, key money managers have jumped into First Industrial Realty Trust, Inc. (NYSE:FR) headfirst. Millennium Management, managed by Israel Englander, established the most valuable position in First Industrial Realty Trust, Inc. (NYSE:FR). Millennium Management had $7.7 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $6.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Jonathan Litt's Land & Buildings Investment Management, Daniel Johnson's Gillson Capital, and Benjamin A. Smith's Laurion Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as First Industrial Realty Trust, Inc. (NYSE:FR) but similarly valued. We will take a look at Planet Fitness Inc (NYSE:PLNT), Axon Enterprise, Inc. (NASDAQ:AAXN), Owens Corning (NYSE:OC), and Kimco Realty Corp (NYSE:KIM). This group of stocks' market caps resemble FR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLNT,44,804544,10 AAXN,26,413473,1 OC,30,398573,-17 KIM,22,55233,6 Average,30.5,417956,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $215 million in FR's case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 22 bullish hedge fund positions. First Industrial Realty Trust, Inc. (NYSE:FR) 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 FR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FR investors were disappointed as the stock returned 16.5% 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.

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