Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by 4 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Ares Commercial Real Estate Corp (NYSE:ACRE).
Ares Commercial Real Estate Corp (NYSE:ACRE) shareholders have witnessed an increase in hedge fund sentiment of late. Our calculations also showed that ACRE isn't among the 30 most popular stocks among hedge funds (see the video below). 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' 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the latest hedge fund action surrounding Ares Commercial Real Estate Corp (NYSE:ACRE).
What have hedge funds been doing with Ares Commercial Real Estate Corp (NYSE:ACRE)?
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ACRE over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Israel Englander's Millennium Management has the biggest position in Ares Commercial Real Estate Corp (NYSE:ACRE), worth close to $7.8 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Paul Marshall and Ian Wace of Marshall Wace LLP, with a $2.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish contain John Overdeck and David Siegel's Two Sigma Advisors, Renaissance Technologies and Ken Griffin's Citadel Investment Group.
Now, key hedge funds have jumped into Ares Commercial Real Estate Corp (NYSE:ACRE) headfirst. Navellier & Associates, managed by Louis Navellier, created the most outsized position in Ares Commercial Real Estate Corp (NYSE:ACRE). Navellier & Associates had $0.7 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.3 million position during the quarter. The following funds were also among the new ACRE investors: Roger Ibbotson's Zebra Capital Management and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Ares Commercial Real Estate Corp (NYSE:ACRE) but similarly valued. These stocks are Briggs & Stratton Corporation (NYSE:BGG), Jernigan Capital Inc (NYSE:JCAP), BioDelivery Sciences International, Inc. (NASDAQ:BDSI), and Mistras Group, Inc. (NYSE:MG). All of these stocks' market caps resemble ACRE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BGG,11,19671,4 JCAP,15,39852,0 BDSI,16,118529,-2 MG,10,28465,0 Average,13,51629,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $20 million in ACRE's case. BioDelivery Sciences International, Inc. (NASDAQ:BDSI) is the most popular stock in this table. On the other hand Mistras Group, Inc. (NYSE:MG) is the least popular one with only 10 bullish hedge fund positions. Ares Commercial Real Estate Corp (NYSE:ACRE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ACRE, though not to the same extent, as the stock returned 4.7% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.