Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Acadia Realty Trust (NYSE:AKR).
Acadia Realty Trust (NYSE:AKR) has seen an increase in activity from the world's largest hedge funds lately. Our calculations also showed that AKR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are assumed to be slow, outdated financial tools of the past. While there are more than 8000 funds trading today, We hone in on the aristocrats of this club, approximately 750 funds. It is estimated that this group of investors control most of all hedge funds' total capital, and by observing their unrivaled equity investments, Insider Monkey has identified many investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_758450" align="aligncenter" width="450"] Martin Whitman of Third Avenue Management[/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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the fresh hedge fund action regarding Acadia Realty Trust (NYSE:AKR).
How are hedge funds trading Acadia Realty Trust (NYSE:AKR)?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the second quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in AKR a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Third Avenue Management was the largest shareholder of Acadia Realty Trust (NYSE:AKR), with a stake worth $26.7 million reported as of the end of September. Trailing Third Avenue Management was Winton Capital Management, which amassed a stake valued at $20.8 million. Balyasny Asset Management, Citadel Investment Group, and Tudor Investment Corp 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 Third Avenue Management allocated the biggest weight to Acadia Realty Trust (NYSE:AKR), around 2.41% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.25 percent of its 13F equity portfolio to AKR.
With a general bullishness amongst the heavyweights, some big names have jumped into Acadia Realty Trust (NYSE:AKR) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, created the biggest position in Acadia Realty Trust (NYSE:AKR). Tudor Investment Corp had $4.3 million invested in the company at the end of the quarter. David E. Shaw's D E Shaw also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Acadia Realty Trust (NYSE:AKR). We will take a look at Wolverine World Wide, Inc. (NYSE:WWW), MyoKardia, Inc. (NASDAQ:MYOK), Urban Edge Properties (NYSE:UE), and PROS Holdings, Inc. (NYSE:PRO). All of these stocks' market caps are closest to AKR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WWW,19,70215,7 MYOK,23,785760,-1 UE,12,93998,0 PRO,24,239879,8 Average,19.5,297463,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $78 million in AKR's case. PROS Holdings, Inc. (NYSE:PRO) is the most popular stock in this table. On the other hand Urban Edge Properties (NYSE:UE) is the least popular one with only 12 bullish hedge fund positions. Acadia Realty Trust (NYSE:AKR) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AKR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AKR investors were disappointed as the stock returned -5.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.