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We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Agree Realty Corporation (NYSE:ADC) based on those filings.
Agree Realty Corporation (NYSE:ADC) was in 18 hedge funds' portfolios at the end of the fourth quarter of 2019. ADC shareholders have witnessed an increase in activity from the world's largest hedge funds of late. There were 11 hedge funds in our database with ADC positions at the end of the previous quarter. Our calculations also showed that ADC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most shareholders, hedge funds are viewed as unimportant, old financial vehicles of the past. While there are greater than 8000 funds in operation today, Our experts hone in on the bigwigs of this club, approximately 850 funds. These hedge fund managers watch over the lion's share of the hedge fund industry's total asset base, and by keeping track of their first-class stock picks, Insider Monkey has identified a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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Dmitry Balyasny of Balyasny Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's analyze the key hedge fund action surrounding Agree Realty Corporation (NYSE:ADC).
Hedge fund activity in Agree Realty Corporation (NYSE:ADC)
Heading into the first quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 64% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ADC over the last 18 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Agree Realty Corporation (NYSE:ADC) was held by Zimmer Partners, which reported holding $74.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $65.1 million position. Other investors bullish on the company included Millennium Management, Balyasny Asset Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Agree Realty Corporation (NYSE:ADC), around 1.03% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.54 percent of its 13F equity portfolio to ADC.
Now, specific money managers were leading the bulls' herd. Zimmer Partners, managed by Stuart J. Zimmer, established the most outsized position in Agree Realty Corporation (NYSE:ADC). Zimmer Partners had $74.2 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $14.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Renaissance Technologies, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Agree Realty Corporation (NYSE:ADC) but similarly valued. These stocks are Cohen & Steers, Inc. (NYSE:CNS), Ameris Bancorp (NASDAQ:ABCB), Penn National Gaming, Inc (NASDAQ:PENN), and PTC Therapeutics, Inc. (NASDAQ:PTCT). This group of stocks' market valuations are similar to ADC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNS,16,94094,0 ABCB,16,160287,0 PENN,27,131433,2 PTCT,34,605873,-2 Average,23.25,247922,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $229 million in ADC's case. PTC Therapeutics, Inc. (NASDAQ:PTCT) is the most popular stock in this table. On the other hand Cohen & Steers, Inc. (NYSE:CNS) is the least popular one with only 16 bullish hedge fund positions. Agree Realty Corporation (NYSE:ADC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on ADC as the stock returned -15% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.