How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CoreSite Realty Corp (NYSE:COR).
Hedge fund interest in CoreSite Realty Corp (NYSE:COR) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Mercury Systems Inc (NASDAQ:MRCY), Aurora Cannabis Inc. (NASDAQ:ACB), and Luckin Coffee Inc. (NASDAQ:LK) to gather more data points. Our calculations also showed that COR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are dozens of signals shareholders employ to size up their stock investments. Two of the most under-the-radar signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the market by a superb amount (see the details here).
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the new hedge fund action encompassing CoreSite Realty Corp (NYSE:COR).
Hedge fund activity in CoreSite Realty Corp (NYSE:COR)
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in COR a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in CoreSite Realty Corp (NYSE:COR), which was worth $127.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $56 million worth of shares. Fisher Asset Management, GLG Partners, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to CoreSite Realty Corp (NYSE:COR), around 0.21% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to COR.
Because CoreSite Realty Corp (NYSE:COR) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who sold off their positions entirely by the end of the third quarter. Intriguingly, Joseph Samuels's Islet Management said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, worth about $5.8 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dumped its stock, about $0.7 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to CoreSite Realty Corp (NYSE:COR). We will take a look at Mercury Systems Inc (NASDAQ:MRCY), Aurora Cannabis Inc. (NASDAQ:ACB), Luckin Coffee Inc. (NASDAQ:LK), and Brunswick Corporation (NYSE:BC). This group of stocks' market caps resemble COR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRCY,22,112572,1 ACB,10,17463,0 LK,23,300025,-8 BC,28,564304,-2 Average,20.75,248591,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $266 million in COR's case. Brunswick Corporation (NYSE:BC) is the most popular stock in this table. On the other hand Aurora Cannabis Inc. (NASDAQ:ACB) is the least popular one with only 10 bullish hedge fund positions. CoreSite Realty Corp (NYSE:COR) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately COR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); COR investors were disappointed as the stock returned -6.9% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.