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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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Preferred Apartment Communities Inc. (NYSE:APTS)?
Hedge fund interest in Preferred Apartment Communities Inc. (NYSE:APTS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare APTS to other stocks including Hemisphere Media Group Inc (NASDAQ:HMTV), SI-BONE, Inc. (NASDAQ:SIBN), and Voyager Therapeutics, Inc. (NASDAQ:VYGR) to get a better sense of its popularity.
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.
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James Dondero of Highland Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. Keeping this in mind we're going to analyze the fresh hedge fund action encompassing Preferred Apartment Communities Inc. (NYSE:APTS).
What have hedge funds been doing with Preferred Apartment Communities Inc. (NYSE:APTS)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in APTS a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Preferred Apartment Communities Inc. (NYSE:APTS) was held by Millennium Management, which reported holding $3.4 million worth of stock at the end of September. It was followed by LDR Capital with a $2 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Highland Capital Management. In terms of the portfolio weights assigned to each position LDR Capital allocated the biggest weight to Preferred Apartment Communities Inc. (NYSE:APTS), around 3.4% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.1 percent of its 13F equity portfolio to APTS.
Due to the fact that Preferred Apartment Communities Inc. (NYSE:APTS) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedgies who sold off their entire stakes last quarter. Interestingly, Renaissance Technologies dropped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, comprising about $1.4 million in stock. David Harding's fund, Winton Capital Management, also sold off its stock, about $0.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Preferred Apartment Communities Inc. (NYSE:APTS) but similarly valued. We will take a look at Hemisphere Media Group Inc (NASDAQ:HMTV), SI-BONE, Inc. (NASDAQ:SIBN), Voyager Therapeutics, Inc. (NASDAQ:VYGR), and Triple-S Management Corp.(NYSE:GTS). All of these stocks' market caps match APTS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMTV,9,26404,1 SIBN,19,77588,12 VYGR,15,50333,-5 GTS,11,94868,-7 Average,13.5,62298,0.25 [/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 $62 million. That figure was $7 million in APTS's case. SI-BONE, Inc. (NASDAQ:SIBN) is the most popular stock in this table. On the other hand Hemisphere Media Group Inc (NASDAQ:HMTV) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Preferred Apartment Communities Inc. (NYSE:APTS) is even less popular than HMTV. Hedge funds dodged a bullet by taking a bearish stance towards APTS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately APTS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); APTS investors were disappointed as the stock returned 5.1% during the second quarter (through June 22nd) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.