Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 4 percentage points through September 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Agree Realty Corporation (NYSE:ADC) has seen an increase in hedge fund sentiment lately. Our calculations also showed that ADC isn't among the 30 most popular stocks among hedge funds (view video below). Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
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 latest hedge fund action encompassing Agree Realty Corporation (NYSE:ADC).
What have hedge funds been doing with Agree Realty Corporation (NYSE:ADC)?
At Q2's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in ADC a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Agree Realty Corporation (NYSE:ADC) was held by Citadel Investment Group, which reported holding $60.1 million worth of stock at the end of March. It was followed by Millennium Management with a $19.6 million position. Other investors bullish on the company included Balyasny Asset Management, Two Sigma Advisors, and Tudor Investment Corp.
Consequently, some big names were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in Agree Realty Corporation (NYSE:ADC). Balyasny Asset Management had $9 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $2.8 million position during the quarter. The other funds with brand new ADC positions are Paul Tudor Jones's Tudor Investment Corp, Jeffrey Talpins's Element Capital Management, and Matthew Tewksbury's Stevens Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Agree Realty Corporation (NYSE:ADC) but similarly valued. We will take a look at Xencor Inc (NASDAQ:XNCR), Meredith Corporation (NYSE:MDP), Turquoise Hill Resources Ltd (NYSE:TRQ), and Columbia Property Trust Inc (NYSE:CXP). All of these stocks' market caps resemble ADC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XNCR,12,269316,-4 MDP,11,271061,0 TRQ,20,666843,3 CXP,12,59497,-3 Average,13.75,316679,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $97 million in ADC's case. Turquoise Hill Resources Ltd (NYSE:TRQ) is the most popular stock in this table. On the other hand Meredith Corporation (NYSE:MDP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Agree Realty Corporation (NYSE:ADC) is even less popular than MDP. Hedge funds clearly dropped the ball on ADC 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 ADC as the stock returned 15.1% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.