We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of W.P. Carey Inc. REIT (NYSE:WPC) based on that data.
W.P. Carey Inc. REIT (NYSE:WPC) has seen an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that WPC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 41 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.
[caption id="attachment_26340" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to review the recent hedge fund action encompassing W.P. Carey Inc. REIT (NYSE:WPC).
What does smart money think about W.P. Carey Inc. REIT (NYSE:WPC)?
At Q4's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the third quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in WPC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in W.P. Carey Inc. REIT (NYSE:WPC) was held by Citadel Investment Group, which reported holding $45.2 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $6.8 million position. Other investors bullish on the company included Millennium Management, Balyasny Asset Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Ayrshire Capital Management allocated the biggest weight to W.P. Carey Inc. REIT (NYSE:WPC), around 0.46% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to WPC.
As one would reasonably expect, key money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in W.P. Carey Inc. REIT (NYSE:WPC). Balyasny Asset Management had $6 million invested in the company at the end of the quarter. OZ Management also made a $2.1 million investment in the stock during the quarter. The following funds were also among the new WPC investors: Renaissance Technologies, John Nevin Jr's Ayrshire Capital Management, and Matthew Tewksbury's Stevens Capital Management.
Let's also examine hedge fund activity in other stocks similar to W.P. Carey Inc. REIT (NYSE:WPC). We will take a look at Gartner Inc (NYSE:IT), Liberty Global Plc (NASDAQ:LBTYK), International Flavors & Fragrances Inc (NYSE:IFF), and Zebra Technologies Corporation (NASDAQ:ZBRA). This group of stocks' market caps are closest to WPC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IT,26,727134,4 LBTYK,44,3362668,0 IFF,28,290762,6 ZBRA,34,614256,15 Average,33,1248705,6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1249 million. That figure was $88 million in WPC's case. Liberty Global Plc (NASDAQ:LBTYK) is the most popular stock in this table. On the other hand Gartner Inc (NYSE:IT) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks W.P. Carey Inc. REIT (NYSE:WPC) is even less popular than IT. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on WPC, though not to the same extent, as the stock returned -24.1% during the same time period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.