The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Equity Residential (NYSE:EQR) based on those filings.
Equity Residential (NYSE:EQR) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that EQR isn't among the 30 most popular stocks among hedge funds (click for Q1 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
[caption id="attachment_26397" align="aligncenter" width="400"] Ray Dalio of Bridgewater Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to view the new hedge fund action regarding Equity Residential (NYSE:EQR).
How have hedgies been trading Equity Residential (NYSE:EQR)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EQR over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Equity Residential (NYSE:EQR) was held by AQR Capital Management, which reported holding $43.5 million worth of stock at the end of September. It was followed by D E Shaw with a $27.2 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Adage Capital Management. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Equity Residential (NYSE:EQR), around 10.11% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, setting aside 4.33 percent of its 13F equity portfolio to EQR.
Due to the fact that Equity Residential (NYSE:EQR) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few funds who sold off their positions entirely heading into Q4. At the top of the heap, Greg Poole's Echo Street Capital Management cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $18.9 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund dropped about $6.9 million worth. These transactions are important to note, as total hedge fund interest was cut by 6 funds heading into Q4.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Equity Residential (NYSE:EQR) but similarly valued. These stocks are Square, Inc. (NYSE:SQ), T. Rowe Price Group, Inc. (NASDAQ:TROW), Verisk Analytics, Inc. (NASDAQ:VRSK), and Public Service Enterprise Group Incorporated (NYSE:PEG). This group of stocks' market caps match EQR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SQ,56,1609151,0 TROW,24,191083,-3 VRSK,31,924894,-2 PEG,34,901655,3 Average,36.25,906696,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $907 million. That figure was $175 million in EQR's case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand T. Rowe Price Group, Inc. (NASDAQ:TROW) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Equity Residential (NYSE:EQR) is even less popular than TROW. Hedge funds dodged a bullet by taking a bearish stance towards EQR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately EQR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); EQR investors were disappointed as the stock returned 4.7% during the second quarter (through June 10th) 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 most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.