Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Equity Lifestyle Properties, Inc. (NYSE:ELS) and see how the stock is affected by the recent hedge fund activity.
Equity Lifestyle Properties, Inc. (NYSE:ELS) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds' portfolios at the end of March. At the end of this article we will also compare ELS to other stocks including Braskem SA (NYSE:BAK), Sun Communities Inc (NYSE:SUI), and Agnico Eagle Mines Limited (NYSE:AEM) to get a better sense of its popularity.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We're going to take a look at the latest hedge fund action encompassing Equity Lifestyle Properties, Inc. (NYSE:ELS).
Hedge fund activity in Equity Lifestyle Properties, Inc. (NYSE:ELS)
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards ELS over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Equity Lifestyle Properties, Inc. (NYSE:ELS), which was worth $345.4 million at the end of the first quarter. On the second spot was AEW Capital Management which amassed $63.8 million worth of shares. Moreover, D E Shaw, Waratah Capital Advisors, and Millennium Management were also bullish on Equity Lifestyle Properties, Inc. (NYSE:ELS), allocating a large percentage of their portfolios to this stock.
Due to the fact that Equity Lifestyle Properties, Inc. (NYSE:ELS) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there were a few hedgies who were dropping their full holdings heading into Q3. Intriguingly, Richard Driehaus's Driehaus Capital cut the biggest stake of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $3.4 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dropped about $2.6 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Equity Lifestyle Properties, Inc. (NYSE:ELS). These stocks are Braskem SA (NYSE:BAK), Sun Communities Inc (NYSE:SUI), Agnico Eagle Mines Limited (NYSE:AEM), and National Oilwell Varco, Inc. (NYSE:NOV). This group of stocks' market caps are similar to ELS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAK,12,310632,3 SUI,18,412771,-4 AEM,24,266152,-1 NOV,18,732601,-4 Average,18,430539,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $431 million. That figure was $572 million in ELS's case. Agnico Eagle Mines Limited (NYSE:AEM) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 12 bullish hedge fund positions. Equity Lifestyle Properties, Inc. (NYSE:ELS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on ELS as the stock returned 8.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.