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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Douglas Emmett, Inc. (NYSE:DEI).
Is DEI a good stock to buy now? The best stock pickers were getting more optimistic. The number of long hedge fund bets improved by 5 recently. Douglas Emmett, Inc. (NYSE:DEI) was in 19 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 27. Our calculations also showed that DEI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Clint Carlson of Carlson Capital
Now we're going to review the fresh hedge fund action encompassing Douglas Emmett, Inc. (NYSE:DEI).
Do Hedge Funds Think DEI Is A Good Stock To Buy Now?
At second quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in DEI over the last 24 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Southeastern Asset Management was the largest shareholder of Douglas Emmett, Inc. (NYSE:DEI), with a stake worth $180.5 million reported as of the end of June. Trailing Southeastern Asset Management was Zimmer Partners, which amassed a stake valued at $100.9 million. Diamond Hill Capital, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Douglas Emmett, Inc. (NYSE:DEI), around 3.63% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, setting aside 1.36 percent of its 13F equity portfolio to DEI.
As one would reasonably expect, specific money managers have jumped into Douglas Emmett, Inc. (NYSE:DEI) headfirst. Carlson Capital, managed by Clint Carlson, created the most valuable position in Douglas Emmett, Inc. (NYSE:DEI). Carlson Capital had $4.9 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $0.9 million position during the quarter. The following funds were also among the new DEI investors: Matthew Crandall Gilman's Hill Winds Capital, Matthew Hulsizer's PEAK6 Capital Management, and Greg Eisner's Engineers Gate Manager.
Let's also examine hedge fund activity in other stocks similar to Douglas Emmett, Inc. (NYSE:DEI). These stocks are Huntsman Corporation (NYSE:HUN), Valvoline Inc. (NYSE:VVV), Clover Health Investments, Corp. (NASDAQ:CLOV), HUTCHMED (China) Limited (NASDAQ:HCM), The Descartes Systems Group Inc (NASDAQ:DSGX), Healthcare Trust Of America Inc (NYSE:HTA), and South State Corporation (NASDAQ:SSB). This group of stocks' market values are closest to DEI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HUN,27,582433,-8 VVV,26,644049,3 CLOV,23,1415710,0 HCM,10,59992,2 DSGX,15,307454,4 HTA,23,226444,6 SSB,18,298543,-6 Average,20.3,504946,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $505 million. That figure was $361 million in DEI's case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand HUTCHMED (China) Limited (NASDAQ:HCM) is the least popular one with only 10 bullish hedge fund positions. Douglas Emmett, Inc. (NYSE:DEI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DEI is 57.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately DEI wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); DEI investors were disappointed as the stock returned 1.1% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.