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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Apollo Commercial Real Est. Finance Inc (NYSE:ARI)?
Is Apollo Commercial Real Est. Finance Inc (NYSE:ARI) a bargain? The best stock pickers are in a bullish mood. The number of bullish hedge fund bets advanced by 1 recently. Our calculations also showed that ARI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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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Donald Sussman of Paloma Partners[/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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to check out the key hedge fund action surrounding Apollo Commercial Real Est. Finance Inc (NYSE:ARI).
What does smart money think about Apollo Commercial Real Est. Finance Inc (NYSE:ARI)?
Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ARI a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Apollo Commercial Real Est. Finance Inc (NYSE:ARI) was held by Millennium Management, which reported holding $14.6 million worth of stock at the end of September. It was followed by Winton Capital Management with a $9.6 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and Weld Capital Management. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Apollo Commercial Real Est. Finance Inc (NYSE:ARI), around 0.91% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.3 percent of its 13F equity portfolio to ARI.
Now, some big names were breaking ground themselves. Weld Capital Management, managed by Minhua Zhang, initiated the most outsized position in Apollo Commercial Real Est. Finance Inc (NYSE:ARI). Weld Capital Management had $1.8 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner's Engineers Gate Manager, Donald Sussman's Paloma Partners, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Apollo Commercial Real Est. Finance Inc (NYSE:ARI) but similarly valued. We will take a look at WW International, Inc. (NASDAQ:WW), Beacon Roofing Supply, Inc. (NASDAQ:BECN), LGI Homes Inc (NASDAQ:LGIH), and Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). This group of stocks' market caps are similar to ARI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WW,22,175765,-15 BECN,20,164410,-2 LGIH,14,53155,1 MDRX,17,126905,-14 Average,18.25,130059,-7.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $41 million in ARI's case. WW International, Inc. (NASDAQ:WW) is the most popular stock in this table. On the other hand LGI Homes Inc (NASDAQ:LGIH) is the least popular one with only 14 bullish hedge fund positions. Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on ARI as the stock returned 31.4% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.