The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of istar Inc (NYSE:STAR).
Is istar Inc (NYSE:STAR) a healthy stock for your portfolio? Hedge funds are becoming less confident. The number of bullish hedge fund positions decreased by 1 in recent months. Our calculations also showed that STAR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). STAR was in 14 hedge funds' portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with STAR positions at the end of the previous quarter. Video: 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 58 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_189632" align="aligncenter" width="392"] David Harding of Winton Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's go over the new hedge fund action encompassing istar Inc (NYSE:STAR).
What does smart money think about istar Inc (NYSE:STAR)?
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in STAR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, EJF Capital, managed by Emanuel J. Friedman, holds the number one position in istar Inc (NYSE:STAR). EJF Capital has a $59.9 million position in the stock, comprising 12.6% of its 13F portfolio. The second most bullish fund manager is Diamond Hill Capital, managed by Ric Dillon, which holds a $20.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Anand Parekh's Alyeska Investment Group, David Harding's Winton Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to istar Inc (NYSE:STAR), around 12.62% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to STAR.
Because istar Inc (NYSE:STAR) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedgies that slashed their positions entirely last quarter. Intriguingly, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners cut the largest position of the 750 funds watched by Insider Monkey, comprising an estimated $28.2 million in stock, and John Khoury's Long Pond Capital was right behind this move, as the fund dropped about $15.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to istar Inc (NYSE:STAR). These stocks are Cooper Tire & Rubber Company (NYSE:CTB), Aphria Inc. (NASDAQ:APHA), Veoneer, Inc. (NYSE:VNE), and Independence Realty Trust Inc (NYSE:IRT). This group of stocks' market valuations match STAR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTB,20,83606,3 APHA,9,5469,0 VNE,11,76220,0 IRT,16,88076,9 Average,14,63343,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $112 million in STAR's case. Cooper Tire & Rubber Company (NYSE:CTB) is the most popular stock in this table. On the other hand Aphria Inc. (NASDAQ:APHA) is the least popular one with only 9 bullish hedge fund positions. istar Inc (NYSE:STAR) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately STAR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); STAR investors were disappointed as the stock returned 19.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.