Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% last year. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Jones Lang LaSalle Inc (NYSE:JLL).
Is Jones Lang LaSalle Inc (NYSE:JLL) ready to rally soon? Prominent investors are getting more bullish. The number of bullish hedge fund bets moved up by 3 lately. Our calculations also showed that JLL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). JLL was in 26 hedge funds' portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with JLL positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="alignnone" width="600"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let's view the latest hedge fund action surrounding Jones Lang LaSalle Inc (NYSE:JLL).
What does smart money think about Jones Lang LaSalle Inc (NYSE:JLL)?
At Q3's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in JLL 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.
Of the funds tracked by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the number one position in Jones Lang LaSalle Inc (NYSE:JLL). Generation Investment Management has a $664 million position in the stock, comprising 4.7% of its 13F portfolio. Coming in second is Ariel Investments, managed by John W. Rogers, which holds a $112.1 million position; 1.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish consist of Ken Griffin's Citadel Investment Group, John Khoury's Long Pond Capital and Ric Dillon's Diamond Hill Capital. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Jones Lang LaSalle Inc (NYSE:JLL), around 7.69% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, earmarking 4.69 percent of its 13F equity portfolio to JLL.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Marshall Wace, managed by Paul Marshall and Ian Wace, initiated the most outsized position in Jones Lang LaSalle Inc (NYSE:JLL). Marshall Wace had $5.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital also initiated a $1.4 million position during the quarter. The other funds with brand new JLL positions are Matthew Tewksbury's Stevens Capital Management, Phil Frohlich's Prescott Group Capital Management, and John Murphy's Levin Easterly Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Jones Lang LaSalle Inc (NYSE:JLL) but similarly valued. We will take a look at Old Republic International Corporation (NYSE:ORI), Hubbell Incorporated (NYSE:HUBB), FLIR Systems, Inc. (NASDAQ:FLIR), and Americold Realty Trust (NYSE:COLD). This group of stocks' market values resemble JLL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ORI,17,417709,-4 HUBB,23,383354,5 FLIR,22,269438,2 COLD,27,472297,-3 Average,22.25,385700,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $1081 million in JLL's case. Americold Realty Trust (NYSE:COLD) is the most popular stock in this table. On the other hand Old Republic International Corporation (NYSE:ORI) is the least popular one with only 17 bullish hedge fund positions. Jones Lang LaSalle Inc (NYSE:JLL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on JLL, though not to the same extent, as the stock returned 38.6% during 2019 and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.