U.S. Markets closed

Hedge Funds Have Never Been This Bullish On Highwoods Properties Inc (HIW)

Nina Todic

We can judge whether Highwoods Properties Inc (NYSE:HIW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Highwoods Properties Inc (NYSE:HIW) has experienced an increase in hedge fund sentiment of late. Our calculations also showed that HIW 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.

5 Most Popular Stocks Among Hedge Funds

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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]

MILLENNIUM MANAGEMENT

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. We're going to check out the new hedge fund action encompassing Highwoods Properties Inc (NYSE:HIW).

What have hedge funds been doing with Highwoods Properties Inc (NYSE:HIW)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 54% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HIW over the last 17 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Highwoods Properties Inc (NYSE:HIW) was held by Renaissance Technologies, which reported holding $111.3 million worth of stock at the end of September. It was followed by Millennium Management with a $40.6 million position. Other investors bullish on the company included Citadel Investment Group, Echo Street Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Highwoods Properties Inc (NYSE:HIW), around 0.63% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, setting aside 0.37 percent of its 13F equity portfolio to HIW.

Now, key hedge funds have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Highwoods Properties Inc (NYSE:HIW). Balyasny Asset Management had $6.8 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.6 million position during the quarter. The other funds with brand new HIW positions are Benjamin A. Smith's Laurion Capital Management, Thomas Bailard's Bailard Inc, and Steve Cohen's Point72 Asset Management.

Let's now take a look at hedge fund activity in other stocks similar to Highwoods Properties Inc (NYSE:HIW). We will take a look at Nuance Communications Inc. (NASDAQ:NUAN), Ashland Global Holdings Inc. (NYSE:ASH), ADT Inc. (NYSE:ADT), and Stericycle Inc (NASDAQ:SRCL). This group of stocks' market valuations match HIW's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NUAN,27,741239,-1 ASH,30,1196782,-1 ADT,16,161151,-4 SRCL,16,700061,0 Average,22.25,699808,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $700 million. That figure was $221 million in HIW's case. Ashland Global Holdings Inc.(NYSE:ASH) is the most popular stock in this table. On the other hand ADT Inc. (NYSE:ADT) is the least popular one with only 16 bullish hedge fund positions. Highwoods Properties Inc (NYSE:HIW) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on HIW, though not to the same extent, as the stock returned 9.1% during the first two months of the fourth quarter and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content