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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards American Assets Trust, Inc (NYSE:AAT).
Is American Assets Trust, Inc (NYSE:AAT) a healthy stock for your portfolio? The best stock pickers were reducing their bets on the stock. The number of bullish hedge fund positions went down by 2 recently. American Assets Trust, Inc (NYSE:AAT) was in 10 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 20. Our calculations also showed that AAT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
To the average investor there are many formulas stock market investors use to value publicly traded companies. A duo of the best formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace the S&P 500 by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a peek at the fresh hedge fund action surrounding American Assets Trust, Inc (NYSE:AAT).
Do Hedge Funds Think AAT Is A Good Stock To Buy Now?
At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in AAT over the last 24 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in American Assets Trust, Inc (NYSE:AAT), which was worth $7.7 million at the end of the second quarter. On the second spot was Steel Canyon Capital which amassed $5.8 million worth of shares. Millennium Management, Renaissance Technologies, and AQR Capital 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 Steel Canyon Capital allocated the biggest weight to American Assets Trust, Inc (NYSE:AAT), around 4% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to AAT.
Seeing as American Assets Trust, Inc (NYSE:AAT) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that decided to sell off their entire stakes by the end of the second quarter. Interestingly, Donald Sussman's Paloma Partners said goodbye to the biggest position of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $0.8 million in stock. D. E. Shaw's fund, D E Shaw, also cut its stock, about $0.6 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as American Assets Trust, Inc (NYSE:AAT) but similarly valued. These stocks are Renasant Corporation (NASDAQ:RNST), CareTrust REIT Inc (NASDAQ:CTRE), InterDigital, Inc. (NASDAQ:IDCC), Century Communities, Inc (NYSE:CCS), Gray Television, Inc. (NYSE:GTN), Silicon Motion Technology Corp. (NASDAQ:SIMO), and Urban Edge Properties (NYSE:UE). This group of stocks' market values match AAT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNST,9,7016,2 CTRE,13,43106,-2 IDCC,19,195338,4 CCS,25,112440,1 GTN,20,101699,-5 SIMO,20,492206,-4 UE,16,110060,4 Average,17.4,151695,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $20 million in AAT's case. Century Communities, Inc (NYSE:CCS) is the most popular stock in this table. On the other hand Renasant Corporation (NASDAQ:RNST) is the least popular one with only 9 bullish hedge fund positions. American Assets Trust, Inc (NYSE:AAT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AAT is 21.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market by 6.2 percentage points. A small number of hedge funds were also right about betting on AAT, though not to the same extent, as the stock returned 4.4% since the end of Q2 (through September 27th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.