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Hedge Funds Have Never Been This Bullish On Sun Communities Inc (SUI)

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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Sun Communities Inc (NYSE:SUI).

Is Sun Communities Inc (NYSE:SUI) going to take off soon? The smart money was betting on the stock. The number of long hedge fund bets advanced by 8 recently. Sun Communities Inc (NYSE:SUI) was in 35 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SUI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 27 hedge funds in our database with SUI positions at the end of the fourth quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Kevin Michael Ulrich Anchorage Advisors
Kevin Michael Ulrich Anchorage Advisors

Kevin Michael Ulrich of Anchorage Advisors

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 battery 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 take a glance at the latest hedge fund action regarding Sun Communities Inc (NYSE:SUI).

Do Hedge Funds Think SUI Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the fourth quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in SUI a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Long Pond Capital was the largest shareholder of Sun Communities Inc (NYSE:SUI), with a stake worth $186.5 million reported as of the end of March. Trailing Long Pond Capital was Echo Street Capital Management, which amassed a stake valued at $165.9 million. Citadel Investment Group, Millennium Management, and Balyasny Asset Management 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 Long Pond Capital allocated the biggest weight to Sun Communities Inc (NYSE:SUI), around 6.37% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, dishing out 6.13 percent of its 13F equity portfolio to SUI.

With a general bullishness amongst the heavyweights, key money managers have jumped into Sun Communities Inc (NYSE:SUI) headfirst. CaaS Capital, managed by Frank Fu, established the most outsized position in Sun Communities Inc (NYSE:SUI). CaaS Capital had $21.9 million invested in the company at the end of the quarter. Matthew L Pinz's Pinz Capital also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are Ken Grossman and Glen Schneider's SG Capital Management, Kevin Michael Ulrich and Anthony Davis's Anchorage Advisors, and Andrew Weiss's Weiss Asset Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sun Communities Inc (NYSE:SUI) but similarly valued. We will take a look at Genuine Parts Company (NYSE:GPC), The Liberty SiriusXM Group (NASDAQ:LSXMA), Smith & Nephew plc (NYSE:SNN), Brookfield Property Partners LP (NASDAQ:BPY), Akamai Technologies, Inc. (NASDAQ:AKAM), Cincinnati Financial Corporation (NASDAQ:CINF), and Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). This group of stocks' market caps are similar to SUI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPC,26,357245,1 LSXMA,38,1727128,-4 SNN,11,42029,-1 BPY,17,205102,8 AKAM,25,206922,-8 CINF,22,886358,2 ALNY,33,740380,-6 Average,24.6,595023,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $1008 million in SUI's case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 11 bullish hedge fund positions. Sun Communities Inc (NYSE:SUI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SUI is 84.4. 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. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on SUI as the stock returned 16.7% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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