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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of American Assets Trust, Inc (NYSE:AAT).
American Assets Trust, Inc (NYSE:AAT) has seen a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that AAT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the key hedge fund action surrounding American Assets Trust, Inc (NYSE:AAT).
How are hedge funds trading American Assets Trust, Inc (NYSE:AAT)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AAT over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Israel Englander's Millennium Management has the most valuable position in American Assets Trust, Inc (NYSE:AAT), worth close to $20.5 million, amounting to less than 0.1%% of its total 13F portfolio. On Millennium Management's heels is Waterfront Capital Partners, managed by Eduardo Abush, which holds an $8.3 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Paul Tudor Jones's Tudor Investment Corp, Cliff Asness's AQR Capital Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital. In terms of the portfolio weights assigned to each position, Waterfront Capital Partners allocated the biggest weight to American Assets Trust, Inc (NYSE:AAT), around 1.29% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to AAT.
Judging by the fact that American Assets Trust, Inc (NYSE:AAT) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of money managers who were dropping their full holdings by the end of the third quarter. Intriguingly, Jeffrey Furber's AEW Capital Management dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $77.5 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund said goodbye to about $5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as American Assets Trust, Inc (NYSE:AAT) but similarly valued. We will take a look at Quaker Chemical Corp (NYSE:KWR), Navistar International Corp (NYSE:NAV), Iridium Communications Inc. (NASDAQ:IRDM), and MGE Energy, Inc. (NASDAQ:MGEE). This group of stocks' market values matches AAT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KWR,18,154202,5 NAV,23,1132856,-3 IRDM,16,138343,4 MGEE,13,54289,0 Average,17.5,369923,1.5 [/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 $370 million. That figure was $37 million in AAT's case. Navistar International Corp (NYSE:NAV) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks American Assets Trust, Inc (NYSE:AAT) is even less popular than MGEE. Hedge funds dodged a bullet by taking a bearish stance towards AAT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AAT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AAT investors were disappointed as the stock returned 1.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.