Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Saul Centers Inc (NYSE:BFS) changed recently.
Hedge fund interest in Saul Centers Inc (NYSE:BFS) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Rowan Companies plc (NYSE:RDC), Core-Mark Holding Company, Inc. (NASDAQ:CORE), and Corporacion America Airports SA (NYSE:CAAP) to gather more data points.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a glance at the fresh hedge fund action surrounding Saul Centers Inc (NYSE:BFS).
What have hedge funds been doing with Saul Centers Inc (NYSE:BFS)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BFS over the last 14 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Saul Centers Inc (NYSE:BFS), which was worth $19.9 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $3 million worth of shares. Moreover, GLG Partners, Citadel Investment Group, and Two Sigma Advisors were also bullish on Saul Centers Inc (NYSE:BFS), allocating a large percentage of their portfolios to this stock.
Due to the fact that Saul Centers Inc (NYSE:BFS) has witnessed a decline in interest from the smart money, it's easy to see that there was a specific group of hedge funds that elected to cut their positions entirely heading into Q3. Intriguingly, Michael Platt and William Reeves's BlueCrest Capital Mgmt. sold off the largest investment of all the hedgies monitored by Insider Monkey, totaling an estimated $0.4 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Saul Centers Inc (NYSE:BFS) but similarly valued. These stocks are Rowan Companies plc (NYSE:RDC), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Corporacion America Airports SA (NYSE:CAAP), and Sun Hydraulics Corporation (NASDAQ:SNHY). This group of stocks' market values resemble BFS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDC,18,356998,-13 CORE,20,39166,1 CAAP,13,39053,-1 SNHY,3,80188,-5 Average,13.5,128851,-4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $25 million in BFS's case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand Sun Hydraulics Corporation (NASDAQ:SNHY) is the least popular one with only 3 bullish hedge fund positions. Saul Centers Inc (NYSE:BFS) is not the least popular stock in this group but hedge fund interest is still below average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BFS wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); BFS investors were disappointed as the stock returned 13% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.