Is Arbor Realty Trust, Inc. (NYSE:ABR) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Arbor Realty Trust, Inc. (NYSE:ABR) shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. ABR was in 10 hedge funds' portfolios at the end of the third quarter of 2018. There were 11 hedge funds in our database with ABR positions at the end of the previous quarter. Our calculations also showed that ABR isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We're going to take a gander at the new hedge fund action encompassing Arbor Realty Trust, Inc. (NYSE:ABR).
What have hedge funds been doing with Arbor Realty Trust, Inc. (NYSE:ABR)?
Heading into the fourth quarter of 2018, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ABR over the last 13 quarters. So, let's review 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 Arbor Realty Trust, Inc. (NYSE:ABR), with a stake worth $5.8 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $5 million. Millennium Management, Two Sigma Advisors, and Navellier & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Arbor Realty Trust, Inc. (NYSE:ABR) has experienced falling interest from hedge fund managers, we can see that there exists a select few funds that elected to cut their full holdings in the third quarter. Interestingly, David Costen Haley's HBK Investments cut the biggest stake of the 700 funds monitored by Insider Monkey, worth close to $29.6 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund sold off about $14.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Arbor Realty Trust, Inc. (NYSE:ABR). We will take a look at Houghton Mifflin Harcourt Co (NASDAQ:HMHC), The Providence Service Corporation (NASDAQ:PRSC), United Financial Bancorp, Inc. (NASDAQ:UBNK), and Adecoagro SA (NYSE:AGRO). This group of stocks' market valuations match ABR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMHC,13,233945,-3 PRSC,12,181978,-1 UBNK,13,65660,-1 AGRO,16,188658,-1 Average,13.5,167560,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $24 million in ABR's case. Adecoagro SA (NYSE:AGRO) is the most popular stock in this table. On the other hand The Providence Service Corporation (NASDAQ:PRSC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Arbor Realty Trust, Inc. (NYSE:ABR) is even less popular than PRSC. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.