Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds' moves.
Is Ventas, Inc. (NYSE:VTR) an excellent investment right now? Investors who are in the know are in a pessimistic mood. The number of long hedge fund positions decreased by 1 recently. Our calculations also showed that VTR isn't among the 30 most popular stocks among hedge funds (see the video below). VTR was in 18 hedge funds' portfolios at the end of June. There were 19 hedge funds in our database with VTR holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a multitude of signals stock traders use to evaluate stocks. Some of the most useful signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a significant margin (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's check out the new hedge fund action surrounding Ventas, Inc. (NYSE:VTR).
What have hedge funds been doing with Ventas, Inc. (NYSE:VTR)?
At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VTR over the last 16 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.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in Ventas, Inc. (NYSE:VTR). Renaissance Technologies has a $287 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $30.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish encompass Cliff Asness's AQR Capital Management, Eduardo Abush's Waterfront Capital Partners and Ken Griffin's Citadel Investment Group.
Judging by the fact that Ventas, Inc. (NYSE:VTR) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few money managers that elected to cut their entire stakes last quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $30.8 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners was right behind this move, as the fund said goodbye to about $0.9 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ventas, Inc. (NYSE:VTR) but similarly valued. These stocks are Discover Financial Services (NYSE:DFS), Waste Connections, Inc. (NYSE:WCN), Verisign, Inc. (NASDAQ:VRSN), and Baker Hughes, a GE company (NYSE:BHGE). All of these stocks' market caps match VTR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DFS,39,935868,3 WCN,26,429678,0 VRSN,32,6013225,1 BHGE,18,337104,-5 Average,28.75,1928969,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1929 million. That figure was $386 million in VTR's case. Discover Financial Services (NYSE:DFS) is the most popular stock in this table. On the other hand Baker Hughes, a GE company (NYSE:BHGE) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Ventas, Inc. (NYSE:VTR) is even less popular than BHGE. Hedge funds clearly dropped the ball on VTR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on VTR as the stock returned 8% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.