Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Urstadt Biddle Properties Inc (NYSE:UBA).
Urstadt Biddle Properties Inc (NYSE:UBA) has experienced an increase in enthusiasm from smart money in recent months. Our calculations also showed that UBA 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_728717" align="aligncenter" width="1613"] Roger Ibbotson of Zebra Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's view the recent hedge fund action encompassing Urstadt Biddle Properties Inc (NYSE:UBA).
How are hedge funds trading Urstadt Biddle Properties Inc (NYSE:UBA)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in UBA a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Urstadt Biddle Properties Inc (NYSE:UBA), which was worth $29.7 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $2.2 million worth of shares. Winton Capital Management, Arrowstreet Capital, and Two Sigma Advisors 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 Zebra Capital Management allocated the biggest weight to Urstadt Biddle Properties Inc (NYSE:UBA), around 0.27% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to UBA.
Now, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in Urstadt Biddle Properties Inc (NYSE:UBA). Arrowstreet Capital had $0.9 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.4 million position during the quarter. The only other fund with a brand new UBA position is Roger Ibbotson's Zebra Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Urstadt Biddle Properties Inc (NYSE:UBA). These stocks are So-Young International Inc. (NASDAQ:SY), Star Bulk Carriers Corp. (NASDAQ:SBLK), HudBay Minerals Inc (NYSE:HBM), and QAD Inc. (NASDAQ:QADA). All of these stocks' market caps are closest to UBA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SY,2,31447,-3 SBLK,12,445578,1 HBM,13,136771,1 QADA,14,128085,3 Average,10.25,185470,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $36 million in UBA's case. QAD Inc. (NASDAQ:QADA) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:SY) is the least popular one with only 2 bullish hedge fund positions. Urstadt Biddle Properties Inc (NYSE:UBA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 UBA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on UBA were disappointed as the stock returned 4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.