Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CubeSmart (NYSE:CUBE).
CubeSmart (NYSE:CUBE) investors should be aware of an increase in enthusiasm from smart money in recent months. CUBE was in 23 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with CUBE positions at the end of the previous quarter. Our calculations also showed that CUBE 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_758429" align="aligncenter" width="450"] Ric Dillon of Diamond Hill Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the latest hedge fund action surrounding CubeSmart (NYSE:CUBE).
How are hedge funds trading CubeSmart (NYSE:CUBE)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the second quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in CUBE a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in CubeSmart (NYSE:CUBE), which was worth $115 million at the end of the third quarter. On the second spot was Echo Street Capital Management which amassed $39.7 million worth of shares. Carlson Capital, Citadel Investment Group, and Arrowstreet Capital 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 Echo Street Capital Management allocated the biggest weight to CubeSmart (NYSE:CUBE), around 0.67% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to CUBE.
As aggregate interest increased, specific money managers have jumped into CubeSmart (NYSE:CUBE) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in CubeSmart (NYSE:CUBE). Arrowstreet Capital had $14.9 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new CUBE investors: Perella Weinberg Partners, Matthew Tewksbury's Stevens Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks similar to CubeSmart (NYSE:CUBE). We will take a look at Etsy Inc (NASDAQ:ETSY), Woodward Inc (NASDAQ:WWD), Commerce Bancshares, Inc. (NASDAQ:CBSH), and Chemed Corporation (NYSE:CHE). All of these stocks' market caps are closest to CUBE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETSY,46,1224288,5 WWD,23,340865,-5 CBSH,9,29611,-2 CHE,20,388232,-1 Average,24.5,495749,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $496 million. That figure was $309 million in CUBE's case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 9 bullish hedge fund positions. CubeSmart (NYSE:CUBE) 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 CUBE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CUBE investors were disappointed as the stock returned -11.6% 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.