Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of EPR Properties (NYSE:EPR) based on that data and determine whether they were really smart about the stock.
Hedge fund interest in EPR Properties (NYSE:EPR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EPR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare EPR to other stocks including Stitch Fix, Inc. (NASDAQ:SFIX), Denali Therapeutics Inc. (NASDAQ:DNLI), and Artisan Partners Asset Management Inc (NYSE:APAM) to get a better sense of its popularity. 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
Peter Rathjens of Arrowstreet Capital
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a gander at the fresh hedge fund action encompassing EPR Properties (NYSE:EPR).
What have hedge funds been doing with EPR Properties (NYSE:EPR)?
At Q2's end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in EPR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Redwood Capital Management was the largest shareholder of EPR Properties (NYSE:EPR), with a stake worth $139.1 million reported as of the end of September. Trailing Redwood Capital Management was Nut Tree Capital, which amassed a stake valued at $64.6 million. Land & Buildings Investment Management, King Street Capital, and Arrowstreet Capital 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 Nut Tree Capital allocated the biggest weight to EPR Properties (NYSE:EPR), around 20.37% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, dishing out 14.8 percent of its 13F equity portfolio to EPR.
Since EPR Properties (NYSE:EPR) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of fund managers that slashed their entire stakes in the second quarter. At the top of the heap, Jared Nussbaum's Nut Tree Capital sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $7.2 million in stock, and J. Alan Reid, Jr.'s Forward Management was right behind this move, as the fund cut about $6.2 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to EPR Properties (NYSE:EPR). We will take a look at Stitch Fix, Inc. (NASDAQ:SFIX), Denali Therapeutics Inc. (NASDAQ:DNLI), Artisan Partners Asset Management Inc (NYSE:APAM), Tripadvisor Inc (NASDAQ:TRIP), Canada Goose Holdings Inc. (NYSE:GOOS), PotlatchDeltic Corporation (NASDAQ:PCH), and Taro Pharmaceutical Industries Ltd. (NYSE:TARO). This group of stocks' market caps are similar to EPR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFIX,28,219372,12 DNLI,21,99880,7 APAM,21,262058,1 TRIP,28,641358,-2 GOOS,20,136796,-6 PCH,22,278277,6 TARO,10,72222,1 Average,21.4,244280,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $329 million in EPR's case. Stitch Fix, Inc. (NASDAQ:SFIX) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 10 bullish hedge fund positions. EPR Properties (NYSE:EPR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EPR is 67.6. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately EPR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on EPR were disappointed as the stock returned -17% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.