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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Equity Lifestyle Properties, Inc. (NYSE:ELS) and determine whether hedge funds skillfully traded this stock.
Hedge fund interest in Equity Lifestyle Properties, Inc. (NYSE:ELS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ELS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Principal Financial Group Inc (NASDAQ:PFG), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Waters Corporation (NYSE:WAT) to gather more data points. Our calculations also showed that ELS isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
To most shareholders, hedge funds are viewed as unimportant, old investment tools of years past. While there are greater than 8000 funds trading today, Our researchers hone in on the bigwigs of this group, about 850 funds. Most estimates calculate that this group of people preside over the lion's share of the hedge fund industry's total asset base, and by tracking their first-class equity investments, Insider Monkey has revealed numerous investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Ken Heebner of Capital Growth Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we're going to take a look at the fresh hedge fund action surrounding Equity Lifestyle Properties, Inc. (NYSE:ELS).
Hedge fund activity in Equity Lifestyle Properties, Inc. (NYSE:ELS)
Heading into the third quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. By comparison, 18 hedge funds held shares or bullish call options in ELS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Equity Lifestyle Properties, Inc. (NYSE:ELS), with a stake worth $253.4 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $44.1 million. Waratah Capital Advisors, Citadel Investment Group, and Horizon Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Equity Lifestyle Properties, Inc. (NYSE:ELS), around 3.59% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, setting aside 3.21 percent of its 13F equity portfolio to ELS.
Since Equity Lifestyle Properties, Inc. (NYSE:ELS) has faced bearish sentiment from the smart money, it's easy to see that there lies a certain "tier" of funds that elected to cut their entire stakes by the end of the second quarter. At the top of the heap, Lawrence Raiman's LDR Capital said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $3.7 million in stock. Mike Vranos's fund, Ellington, also cut its stock, about $1.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Equity Lifestyle Properties, Inc. (NYSE:ELS). These stocks are Principal Financial Group Inc (NASDAQ:PFG), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Waters Corporation (NYSE:WAT), Varian Medical Systems, Inc. (NYSE:VAR), Ubiquiti Inc. (NYSE:UI), SVB Financial Group (NASDAQ:SIVB), and Jacobs Engineering Group Inc. (NYSE:J). This group of stocks' market values are similar to ELS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFG,31,188356,4 NBIX,38,1195826,0 WAT,38,615214,13 VAR,27,586063,2 UI,29,227931,6 SIVB,26,456322,-4 J,32,1047013,4 Average,31.6,616675,3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $617 million. That figure was $442 million in ELS's case. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is the most popular stock in this table. On the other hand SVB Financial Group (NASDAQ:SIVB) is the least popular one with only 26 bullish hedge fund positions. Equity Lifestyle Properties, Inc. (NYSE:ELS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ELS is 55.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately ELS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ELS investors were disappointed as the stock returned 4.2% since Q2 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.