It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Jones Lang LaSalle Inc (NYSE:JLL).
Jones Lang LaSalle Inc (NYSE:JLL) was in 19 hedge funds' portfolios at the end of December. JLL investors should be aware of a decrease in enthusiasm from smart money lately. There were 21 hedge funds in our database with JLL positions at the end of the previous quarter. Our calculations also showed that JLL isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
We're going to take a look at the fresh hedge fund action surrounding Jones Lang LaSalle Inc (NYSE:JLL).
Hedge fund activity in Jones Lang LaSalle Inc (NYSE:JLL)
Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in JLL a year ago. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Generation Investment Management held the most valuable stake in Jones Lang LaSalle Inc (NYSE:JLL), which was worth $537.7 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $93.5 million worth of shares. Moreover, Diamond Hill Capital, Millennium Management, and Two Sigma Advisors were also bullish on Jones Lang LaSalle Inc (NYSE:JLL), allocating a large percentage of their portfolios to this stock.
Because Jones Lang LaSalle Inc (NYSE:JLL) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who were dropping their full holdings in the third quarter. It's worth mentioning that James Parsons's Junto Capital Management cut the largest position of the 700 funds tracked by Insider Monkey, comprising close to $24.8 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $11.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Jones Lang LaSalle Inc (NYSE:JLL) but similarly valued. These stocks are The Middleby Corporation (NASDAQ:MIDD), Etsy Inc (NASDAQ:ETSY), Five Below Inc (NASDAQ:FIVE), and Michael Kors Holdings Ltd (NYSE:KORS). This group of stocks' market caps resemble JLL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MIDD,17,499841,0 ETSY,39,885247,7 FIVE,32,388480,6 KORS,33,758100,-14 Average,30.25,632917,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $633 million. That figure was $712 million in JLL's case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand The Middleby Corporation (NASDAQ:MIDD) is the least popular one with only 17 bullish hedge fund positions. Jones Lang LaSalle Inc (NYSE:JLL) is not the least popular stock in this group but hedge fund interest is still below average. 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 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. Hedge funds were also right about betting on JLL as the stock returned 22.2% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.