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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on CubeSmart (NYSE:CUBE).
CubeSmart (NYSE:CUBE) shares haven't seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of the fourth quarter of 2019. 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 EnCana Corporation (NYSE:ECA), Bilibili Inc. (NASDAQ:BILI), and Teladoc Inc (NYSE:TDOC) to gather more data points. Our calculations also showed that CUBE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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_758429" align="aligncenter" width="400"] Ric Dillon of Diamond Hill Capital[/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. Keeping this in mind let's take a look at the new hedge fund action encompassing CubeSmart (NYSE:CUBE).
What have hedge funds been doing with CubeSmart (NYSE:CUBE)?
At Q4's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CUBE over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Diamond Hill Capital held the most valuable stake in CubeSmart (NYSE:CUBE), which was worth $106.3 million at the end of the third quarter. On the second spot was Echo Street Capital Management which amassed $75.5 million worth of shares. Balyasny Asset Management, Winton Capital Management, 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 Echo Street Capital Management allocated the biggest weight to CubeSmart (NYSE:CUBE), around 1.16% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, designating 0.53 percent of its 13F equity portfolio to CUBE.
Since CubeSmart (NYSE:CUBE) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of money managers who were dropping their full holdings by the end of the third quarter. It's worth mentioning that Clint Carlson's Carlson Capital sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $33.4 million in stock, and Matthew Crandall Gilman's Hill Winds Capital was right behind this move, as the fund said goodbye to about $5.4 million worth. These moves are important to note, as aggregate 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 CubeSmart (NYSE:CUBE) but similarly valued. These stocks are EnCana Corporation (NYSE:ECA), Bilibili Inc. (NASDAQ:BILI), Teladoc Inc (NYSE:TDOC), and Texas Pacific Land Trust (NYSE:TPL). This group of stocks' market values match CUBE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ECA,23,157151,-3 BILI,23,498114,5 TDOC,23,329887,3 TPL,17,1468604,5 Average,21.5,613439,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $613 million. That figure was $270 million in CUBE's case. EnCana Corporation (NYSE:ECA) is the most popular stock in this table. On the other hand Texas Pacific Land Trust (NYSE:TPL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks CubeSmart (NYSE:CUBE) is more popular among hedge funds. 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 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately CUBE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CUBE were disappointed as the stock returned -23% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.