Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Highwoods Properties Inc (NYSE:HIW) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that HIW isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to go over the recent hedge fund action encompassing Highwoods Properties Inc (NYSE:HIW).
How have hedgies been trading Highwoods Properties Inc (NYSE:HIW)?
At Q2's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in HIW a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Highwoods Properties Inc (NYSE:HIW), worth close to $81.3 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is Echo Street Capital Management, managed by Greg Poole, which holds a $39 million position; 0.7% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass Ken Griffin's Citadel Investment Group, Israel Englander's Millennium Management and D. E. Shaw's D E Shaw.
Judging by the fact that Highwoods Properties Inc (NYSE:HIW) has faced declining sentiment from the smart money, logic holds that there were a few fund managers who sold off their positions entirely heading into Q3. At the top of the heap, David Costen Haley's HBK Investments cut the biggest investment of the 750 funds monitored by Insider Monkey, worth an estimated $1.3 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also cut its stock, about $1.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds heading into Q3.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Highwoods Properties Inc (NYSE:HIW) but similarly valued. We will take a look at Foot Locker, Inc. (NYSE:FL), Six Flags Entertainment Corp (NYSE:SIX), The Boston Beer Company Inc (NYSE:SAM), and New Jersey Resources Corp (NYSE:NJR). This group of stocks' market values resemble HIW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FL,32,592888,-3 SIX,30,741613,0 SAM,23,591137,1 NJR,12,78095,1 Average,24.25,500933,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $501 million. That figure was $166 million in HIW's case. Foot Locker, Inc. (NYSE:FL) is the most popular stock in this table. On the other hand New Jersey Resources Corp (NYSE:NJR) is the least popular one with only 12 bullish hedge fund positions. Highwoods Properties Inc (NYSE:HIW) 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 HIW as the stock returned 10% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.