The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Bluerock Residential Growth REIT Inc (NYSE:BRG) from the perspective of those elite funds.
Bluerock Residential Growth REIT Inc (NYSE:BRG) investors should be aware of an increase in activity from the world's largest hedge funds lately. BRG was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 8 hedge funds in our database with BRG positions at the end of the previous quarter. Our calculations also showed that brg isn't among the 30 most popular stocks among hedge funds.
To the average investor there are dozens of signals market participants put to use to appraise publicly traded companies. A pair of the less known signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the broader indices by a very impressive amount (see the details here).
[caption id="attachment_758454" align="aligncenter" width="450"] James Dondero of Highland Capital Management[/caption]
Let's take a glance at the recent hedge fund action surrounding Bluerock Residential Growth REIT Inc (NYSE:BRG).
How are hedge funds trading Bluerock Residential Growth REIT Inc (NYSE:BRG)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in BRG a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Harbert Management held the most valuable stake in Bluerock Residential Growth REIT Inc (NYSE:BRG), which was worth $12.8 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $6.2 million worth of shares. Moreover, Highland Capital Management, Springbok Capital, and Arrowstreet Capital were also bullish on Bluerock Residential Growth REIT Inc (NYSE:BRG), allocating a large percentage of their portfolios to this stock.
Consequently, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Bluerock Residential Growth REIT Inc (NYSE:BRG). Arrowstreet Capital had $1.5 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new BRG position is David Harding's Winton Capital Management.
Let's go over hedge fund activity in other stocks similar to Bluerock Residential Growth REIT Inc (NYSE:BRG). We will take a look at USA Technologies, Inc. (NASDAQ:USAT), Compugen Ltd. (NASDAQ:CGEN), Monroe Capital Corp (NASDAQ:MRCC), and ACM Research, Inc. (NASDAQ:ACMR). All of these stocks' market caps match BRG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position USAT,14,44291,-4 CGEN,3,6532,-1 MRCC,4,2895,1 ACMR,2,181,2 Average,5.75,13475,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $27 million in BRG's case. USA Technologies, Inc. (NASDAQ:USAT) is the most popular stock in this table. On the other hand ACM Research, Inc. (NASDAQ:ACMR) is the least popular one with only 2 bullish hedge fund positions. Bluerock Residential Growth REIT Inc (NYSE:BRG) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on BRG as the stock returned 11.7% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.