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Is ELS Stock A Buy or Sell?

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In this article we will take a look at whether hedge funds think Equity Lifestyle Properties, Inc. (NYSE:ELS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is ELS stock a buy? Equity Lifestyle Properties, Inc. (NYSE:ELS) has experienced a decrease in hedge fund sentiment of late. Equity Lifestyle Properties, Inc. (NYSE:ELS) was in 24 hedge funds' portfolios at the end of December. The all time high for this statistic is 31. There were 28 hedge funds in our database with ELS positions at the end of the third quarter. Our calculations also showed that ELS isn't among the 30 most popular stocks among hedge funds (click for Q4 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 124 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.

Stuart Zimmer Zimmer Partners
Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 let's go over the recent hedge fund action regarding Equity Lifestyle Properties, Inc. (NYSE:ELS).

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

At Q4's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ELS over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Equity Lifestyle Properties, Inc. (NYSE:ELS), with a stake worth $163 million reported as of the end of December. Trailing Renaissance Technologies was Long Pond Capital, which amassed a stake valued at $102.9 million. Citadel Investment Group, D E Shaw, and Zimmer Partners 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 Long Pond Capital allocated the biggest weight to Equity Lifestyle Properties, Inc. (NYSE:ELS), around 3.44% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, setting aside 3.25 percent of its 13F equity portfolio to ELS.

Due to the fact that Equity Lifestyle Properties, Inc. (NYSE:ELS) has experienced declining sentiment from hedge fund managers, logic holds that there lies a certain "tier" of money managers that elected to cut their full holdings last quarter. Interestingly, Ken Grossman and Glen Schneider's SG Capital Management dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at about $7.3 million in stock, and Matthew Crandall Gilman's Hill Winds Capital was right behind this move, as the fund dumped about $5.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Equity Lifestyle Properties, Inc. (NYSE:ELS). These stocks are Lamb Weston Holdings, Inc. (NYSE:LW), Five9 Inc (NASDAQ:FIVN), Fidelity National Financial Inc (NYSE:FNF), Concho Resources Inc. (NYSE:CXO), WestRock Company (NYSE:WRK), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), and Equitable Holdings, Inc. (NYSE:EQH). This group of stocks' market values are closest to ELS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LW,29,335180,2 FIVN,47,1929875,0 FNF,40,1337274,-4 CXO,41,1045563,-6 WRK,43,668766,11 XRAY,28,1224435,3 EQH,46,1269636,10 Average,39.1,1115818,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $1116 million. That figure was $702 million in ELS's case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Equity Lifestyle Properties, Inc. (NYSE:ELS) is even less popular than XRAY. Our overall hedge fund sentiment score for ELS is 24.2. 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. Hedge funds dodged a bullet by taking a bearish stance towards ELS. Our calculations showed that the top 30 most popular hedge fund stocks returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th but managed to beat the market again by 0.9 percentage points. Unfortunately ELS wasn't nearly as popular as these 30 stocks (hedge fund sentiment was very bearish); ELS investors were disappointed as the stock returned 7.7% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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