Is Essex Property Trust Inc (NYSE:ESS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Essex Property Trust Inc (NYSE:ESS) shareholders have witnessed a decrease in enthusiasm from smart money recently. ESS was in 16 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with ESS positions at the end of the previous quarter. Our calculations also showed that ESS isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Let's go over the recent hedge fund action regarding Essex Property Trust Inc (NYSE:ESS).
How have hedgies been trading Essex Property Trust Inc (NYSE:ESS)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ESS over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Essex Property Trust Inc (NYSE:ESS), which was worth $229 million at the end of the first quarter. On the second spot was AEW Capital Management which amassed $160.5 million worth of shares. Moreover, Adage Capital Management, AQR Capital Management, and Citadel Investment Group were also bullish on Essex Property Trust Inc (NYSE:ESS), allocating a large percentage of their portfolios to this stock.
Since Essex Property Trust Inc (NYSE:ESS) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of funds who sold off their positions entirely by the end of the third quarter. Intriguingly, Richard Driehaus's Driehaus Capital dumped the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $5.6 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund dumped about $1.7 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Essex Property Trust Inc (NYSE:ESS). These stocks are AMETEK, Inc. (NYSE:AME), Harris Corporation (NYSE:HRS), American Water Works Company, Inc. (NYSE:AWK), and Pembina Pipeline Corp (NYSE:PBA). This group of stocks' market valuations match ESS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AME,29,1038604,-3 HRS,25,783732,2 AWK,28,609712,0 PBA,15,102666,1 Average,24.25,633679,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $634 million. That figure was $447 million in ESS's case. AMETEK, Inc. (NYSE:AME) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 15 bullish hedge fund positions. Essex Property Trust Inc (NYSE:ESS) 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 ESS, though not to the same extent, as the stock returned 4.3% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.