It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Healthcare Realty Trust Inc (NYSE:HR).
Is Healthcare Realty Trust Inc (NYSE:HR) an excellent investment today? Investors who are in the know are becoming less confident. The number of long hedge fund positions dropped by 5 recently. Our calculations also showed that HR isn't among the 30 most popular stocks among hedge funds (view the video below). HR was in 9 hedge funds' portfolios at the end of June. There were 14 hedge funds in our database with HR positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the recent hedge fund action regarding Healthcare Realty Trust Inc (NYSE:HR).
Hedge fund activity in Healthcare Realty Trust Inc (NYSE:HR)
At Q2's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in HR a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Carlson Capital held the most valuable stake in Healthcare Realty Trust Inc (NYSE:HR), which was worth $15.6 million at the end of the second quarter. On the second spot was Zimmer Partners which amassed $13.3 million worth of shares. Moreover, Sandler Capital Management, Hudson Bay Capital Management, and AQR Capital Management were also bullish on Healthcare Realty Trust Inc (NYSE:HR), allocating a large percentage of their portfolios to this stock.
Since Healthcare Realty Trust Inc (NYSE:HR) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of funds that slashed their full holdings last quarter. Intriguingly, Paul Singer's Elliott Management said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $24.3 million in stock. Renaissance Technologies, also said goodbye to its stock, about $2.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Healthcare Realty Trust Inc (NYSE:HR). We will take a look at Wintrust Financial Corporation (NASDAQ:WTFC), Repligen Corporation (NASDAQ:RGEN), Service Properties Trust (NASDAQ:HPT), and First Financial Bankshares Inc (NASDAQ:FFIN). This group of stocks' market values match HR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WTFC,23,394159,0 RGEN,22,167527,2 HPT,13,58292,2 FFIN,12,30841,-1 Average,17.5,162705,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $47 million in HR's case. Wintrust Financial Corporation (NASDAQ:WTFC) is the most popular stock in this table. On the other hand First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Healthcare Realty Trust Inc (NYSE:HR) is even less popular than FFIN. Hedge funds clearly dropped the ball on HR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on HR as the stock returned 7.9% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.