Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Acadia Realty Trust (NYSE:AKR) to find out whether it was one of their high conviction long-term ideas.
Is Acadia Realty Trust (NYSE:AKR) the right investment to pursue these days? Money managers are becoming less confident. The number of bullish hedge fund positions dropped by 1 lately. Our calculations also showed that AKR isn't among the 30 most popular stocks among hedge funds. AKR was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with AKR positions at the end of the previous quarter.
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 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 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_758450" align="aligncenter" width="450"] Martin Whitman of Third Avenue Management[/caption]
We're going to take a look at the new hedge fund action encompassing Acadia Realty Trust (NYSE:AKR).
What have hedge funds been doing with Acadia Realty Trust (NYSE:AKR)?
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the fourth quarter of 2018. On the other hand, there were a total of 9 hedge funds with a bullish position in AKR a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Acadia Realty Trust (NYSE:AKR) was held by AEW Capital Management, which reported holding $40.1 million worth of stock at the end of March. It was followed by Third Avenue Management with a $34.9 million position. Other investors bullish on the company included Fisher Asset Management, Renaissance Technologies, and Balyasny Asset Management.
Seeing as Acadia Realty Trust (NYSE:AKR) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, D. E. Shaw's D E Shaw cut the biggest position of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $3.3 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $0.4 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to Acadia Realty Trust (NYSE:AKR). We will take a look at Matador Resources Co (NYSE:MTDR), Norbord Inc. (NYSE:OSB), Workiva Inc (NYSE:WK), and Hamilton Lane Incorporated (NASDAQ:HLNE). All of these stocks' market caps are closest to AKR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTDR,14,139097,4 OSB,7,26488,0 WK,17,234532,1 HLNE,10,54571,1 Average,12,113672,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $111 million in AKR's case. Workiva Inc (NYSE:WK) is the most popular stock in this table. On the other hand Norbord Inc. (NYSE:OSB) is the least popular one with only 7 bullish hedge fund positions. Acadia Realty Trust (NYSE:AKR) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on AKR, though not to the same extent, as the stock returned 5.4% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.