Did Hedge Funds Drop The Ball On Senior Housing Properties Trust (SNH) ?
World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Senior Housing Properties Trust (NASDAQ:SNH) the right pick for your portfolio? The best stock pickers are taking a bearish view. The number of bullish hedge fund bets fell by 4 recently. Our calculations also showed that SNH isn't among the 30 most popular stocks among hedge funds (view video below).
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We're going to check out the key hedge fund action surrounding Senior Housing Properties Trust (NASDAQ:SNH).
What does smart money think about Senior Housing Properties Trust (NASDAQ:SNH)?
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SNH 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.
Of the funds tracked by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the largest position in Senior Housing Properties Trust (NASDAQ:SNH). D E Shaw has a $7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $6.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of John Overdeck and David Siegel's Two Sigma Advisors, Cliff Asness's AQR Capital Management and Matthew Tewksbury's Stevens Capital Management.
Seeing as Senior Housing Properties Trust (NASDAQ:SNH) has experienced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers that elected to cut their entire stakes by the end of the second quarter. At the top of the heap, Israel Englander's Millennium Management dumped the largest position of the 750 funds watched by Insider Monkey, comprising close to $18.6 million in stock. Ken Fisher's fund, Fisher Asset Management, also said goodbye to its stock, about $1.3 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks similar to Senior Housing Properties Trust (NASDAQ:SNH). We will take a look at Acushnet Holdings Corp. (NYSE:GOLF), Hilltop Holdings Inc. (NYSE:HTH), Retail Opportunity Investments Corp (NASDAQ:ROIC), and Anixter International Inc. (NYSE:AXE). This group of stocks' market valuations are similar to SNH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOLF,11,22113,-2 HTH,18,107708,-1 ROIC,13,109601,5 AXE,20,258192,-3 Average,15.5,124404,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $22 million in SNH's case. Anixter International Inc. (NYSE:AXE) is the most popular stock in this table. On the other hand Acushnet Holdings Corp. (NYSE:GOLF) is the least popular one with only 11 bullish hedge fund positions. Senior Housing Properties Trust (NASDAQ:SNH) is not the least popular stock in this group but hedge fund interest is still below average. 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 SNH as the stock returned 14% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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