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Is DRE A Good Stock To Buy According To Hedge Funds?

Asma UL Husna
·6 min read

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Duke Realty Corporation (NYSE:DRE).

Is DRE a good stock to buy now? Duke Realty Corporation (NYSE:DRE) has seen an increase in activity from the world's largest hedge funds lately. Duke Realty Corporation (NYSE:DRE) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. There were 19 hedge funds in our database with DRE positions at the end of the second quarter. Our calculations also showed that DRE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Best Magic Formula Investing Stocks To Buy Now
Best Magic Formula Investing Stocks To Buy Now

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to check out the key hedge fund action surrounding Duke Realty Corporation (NYSE:DRE).

Do Hedge Funds Think DRE Is A Good Stock To Buy Now?

At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DRE over the last 21 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.

More specifically, Millennium Management was the largest shareholder of Duke Realty Corporation (NYSE:DRE), with a stake worth $62.2 million reported as of the end of September. Trailing Millennium Management was Adage Capital Management, which amassed a stake valued at $15.4 million. Gillson Capital, Renaissance Technologies, and Balyasny Asset Management 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 Gillson Capital allocated the biggest weight to Duke Realty Corporation (NYSE:DRE), around 2.16% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.1 percent of its 13F equity portfolio to DRE.

As one would reasonably expect, some big names were breaking ground themselves. Renaissance Technologies, assembled the largest position in Duke Realty Corporation (NYSE:DRE). Renaissance Technologies had $11.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $9.2 million investment in the stock during the quarter. The other funds with brand new DRE positions are Noam Gottesman's GLG Partners, Joel Greenblatt's Gotham Asset Management, and Paul Tudor Jones's Tudor Investment Corp.

Let's also examine hedge fund activity in other stocks similar to Duke Realty Corporation (NYSE:DRE). We will take a look at Black Knight, Inc. (NYSE:BKI), Magna International Inc. (NYSE:MGA), Burlington Stores Inc (NYSE:BURL), MongoDB, Inc. (NASDAQ:MDB), Nucor Corporation (NYSE:NUE), Zebra Technologies Corporation (NASDAQ:ZBRA), and Kirkland Lake Gold Ltd. (NYSE:KL). This group of stocks' market values resemble DRE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKI,41,947273,-3 MGA,21,348863,2 BURL,30,1219720,-8 MDB,42,1356747,5 NUE,28,110512,2 ZBRA,44,817708,6 KL,22,513630,-1 Average,32.6,759208,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $759 million. That figure was $145 million in DRE's case. Zebra Technologies Corporation (NASDAQ:ZBRA) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 21 bullish hedge fund positions. Duke Realty Corporation (NYSE:DRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DRE is 37.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately DRE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DRE investors were disappointed as the stock returned 5.6% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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