Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of UDR, Inc. (NYSE:UDR) based on that data and determine whether they were really smart about the stock.
Is UDR, Inc. (NYSE:UDR) the right pick for your portfolio? Money managers were in an optimistic mood. The number of long hedge fund bets inched up by 10 recently. UDR, Inc. (NYSE:UDR) was in 29 hedge funds' portfolios at the end of June. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that UDR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 19 hedge funds in our database with UDR positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we're going to go over the key hedge fund action surrounding UDR, Inc. (NYSE:UDR).
What have hedge funds been doing with UDR, Inc. (NYSE:UDR)?
At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 53% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UDR over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in UDR, Inc. (NYSE:UDR). Renaissance Technologies has a $107 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies's heels is Zimmer Partners, led by Stuart J. Zimmer, holding a $99.1 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism encompass Ken Griffin's Citadel Investment Group, John Khoury's Long Pond Capital and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to UDR, Inc. (NYSE:UDR), around 1.44% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, setting aside 1.34 percent of its 13F equity portfolio to UDR.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into UDR, Inc. (NYSE:UDR) headfirst. Zimmer Partners, managed by Stuart J. Zimmer, created the most valuable position in UDR, Inc. (NYSE:UDR). Zimmer Partners had $99.1 million invested in the company at the end of the quarter. John Khoury's Long Pond Capital also made a $36.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners, Benjamin A. Smith's Laurion Capital Management, and Chen Tianqiao's Shanda Asset Management.
Let's now review hedge fund activity in other stocks similar to UDR, Inc. (NYSE:UDR). These stocks are CenturyLink, Inc. (NYSE:CTL), E*TRADE Financial Corporation (NASDAQ:ETFC), Wabtec Corporation (NYSE:WAB), Logitech International SA (NASDAQ:LOGI), Nordson Corporation (NASDAQ:NDSN), DraftKings Inc. (NASDAQ:DKNG), and PerkinElmer, Inc. (NYSE:PKI). This group of stocks' market values resemble UDR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTL,30,788387,-4 ETFC,36,1370357,-1 WAB,39,1528246,-2 LOGI,13,277342,-2 NDSN,21,67604,-1 DKNG,53,693614,18 PKI,30,1263237,9 Average,31.7,855541,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $856 million. That figure was $389 million in UDR's case. DraftKings Inc. (NASDAQ:DKNG) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 13 bullish hedge fund positions. UDR, Inc. (NYSE:UDR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for UDR is 60. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately UDR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UDR investors were disappointed as the stock returned -4.9% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.