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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in National Storage Affiliates Trust (NYSE:NSA)? The smart money sentiment can provide an answer to this question.
National Storage Affiliates Trust (NYSE:NSA) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 21. NSA has experienced an increase in activity from the world's largest hedge funds recently. There were 14 hedge funds in our database with NSA positions at the end of the first quarter. Our calculations also showed that NSA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 S&P 500 ETFs by 79 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.
Ken Heebner of Capital Growth Management
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. Keeping this in mind let's check out the new hedge fund action surrounding National Storage Affiliates Trust (NYSE:NSA).
Do Hedge Funds Think NSA Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in NSA a year ago. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of National Storage Affiliates Trust (NYSE:NSA), with a stake worth $92.3 million reported as of the end of June. Trailing Millennium Management was Capital Growth Management, which amassed a stake valued at $25.3 million. Citadel Investment Group, Balyasny Asset Management, and Renaissance Technologies 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 Capital Growth Management allocated the biggest weight to National Storage Affiliates Trust (NYSE:NSA), around 2.28% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, designating 0.47 percent of its 13F equity portfolio to NSA.
As industrywide interest jumped, key hedge funds have jumped into National Storage Affiliates Trust (NYSE:NSA) headfirst. Capital Growth Management, managed by Ken Heebner, assembled the most valuable position in National Storage Affiliates Trust (NYSE:NSA). Capital Growth Management had $25.3 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $16.1 million investment in the stock during the quarter. The other funds with brand new NSA positions are Noam Gottesman's GLG Partners, J. Alan Reid, Jr.'s Forward Management, and Mika Toikka's AlphaCrest Capital Management.
Let's go over hedge fund activity in other stocks similar to National Storage Affiliates Trust (NYSE:NSA). These stocks are Ambarella Inc (NASDAQ:AMBA), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), Schneider National, Inc. (NYSE:SNDR), Hancock Whitney Corporation (NASDAQ:HWC), Digitalbridge Group Inc (NYSE:DBRG), Editas Medicine, Inc. (NASDAQ:EDIT), and Eastern Bankshares, Inc. (NASDAQ:EBC). This group of stocks' market values are similar to NSA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMBA,37,341764,2 AJRD,29,845940,-1 SNDR,20,122133,1 HWC,22,127792,7 DBRG,29,686986,4 EDIT,23,506626,-1 EBC,20,115205,6 Average,25.7,392349,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $392 million. That figure was $208 million in NSA's case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Schneider National, Inc. (NYSE:SNDR) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks National Storage Affiliates Trust (NYSE:NSA) is even less popular than SNDR. Our overall hedge fund sentiment score for NSA is 38.6. 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. Hedge funds clearly dropped the ball on NSA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on NSA as the stock returned 19.3% since Q2 (through October 22nd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.