U.S. Markets closed

Hedge Funds Bailed Out of Brookfield Property Partners (BPY) At The Wrong Time

Nina Todic

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Brookfield Property Partners LP (NASDAQ:BPY) changed recently.

Brookfield Property Partners LP (NASDAQ:BPY) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Our calculations also showed that BPY isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

FARALLON CAPITAL

We're going to check out the fresh hedge fund action encompassing Brookfield Property Partners LP (NYSE:BPY).

What have hedge funds been doing with Brookfield Property Partners LP (NASDAQ:BPY)?

Heading into the first quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BPY over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BPY

Among these funds, Farallon Capital held the most valuable stake in Brookfield Property Partners LP (NYSE:BPY), which was worth $33.4 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $20.3 million worth of shares. Moreover, Renaissance Technologies, Forward Management, and Vertex One Asset Management were also bullish on Brookfield Property Partners LP (NYSE:BPY), allocating a large percentage of their portfolios to this stock.

Because Brookfield Property Partners LP (NASDAQ:BPY) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds that elected to cut their full holdings last quarter. At the top of the heap, Noam Gottesman's GLG Partners dumped the largest investment of the 700 funds watched by Insider Monkey, totaling about $40.4 million in stock, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund dumped about $17.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Brookfield Property Partners LP (NASDAQ:BPY) but similarly valued. We will take a look at Pentair plc (NYSE:PNR), NIO Inc. (NYSE:NIO), Guidewire Software Inc (NYSE:GWRE), and Neurocrine Biosciences, Inc. (NASDAQ:NBIX). This group of stocks' market values match BPY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNR,25,645162,1 NIO,13,65823,-1 GWRE,20,564802,-12 NBIX,37,781900,-2 Average,23.75,514422,-3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $514 million. That figure was $86 million in BPY's case. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Brookfield Property Partners LP (NASDAQ:BPY) is even less popular than NIO. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Only a small number of hedge funds were also right about betting on BPY as the stock returned 33.2% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content