Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about EPR Properties (NYSE:EPR).
Is EPR Properties (NYSE:EPR) going to take off soon? Prominent investors are in a bearish mood. The number of long hedge fund positions decreased by 5 recently. Our calculations also showed that EPR isn't among the 30 most popular stocks among hedge funds. EPR was in 17 hedge funds' portfolios at the end of March. There were 22 hedge funds in our database with EPR holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's view the latest hedge fund action regarding EPR Properties (NYSE:EPR).
Hedge fund activity in EPR Properties (NYSE:EPR)
Heading into the second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EPR over the last 15 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in EPR Properties (NYSE:EPR) was held by Two Sigma Advisors, which reported holding $31.9 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $19.6 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Forward Management.
Since EPR Properties (NYSE:EPR) has faced bearish sentiment from the smart money, it's safe to say that there is a sect of fund managers who sold off their full holdings heading into Q3. Interestingly, Greg Poole's Echo Street Capital Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $4.9 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund sold off about $4.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 5 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to EPR Properties (NYSE:EPR). We will take a look at First American Financial Corp (NYSE:FAF), HUYA Inc. (NYSE:HUYA), Brookfield Renewable Partners L.P. (NYSE:BEP), and Elastic N.V. (NYSE:ESTC). This group of stocks' market caps match EPR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FAF,30,679005,-3 HUYA,21,307858,5 BEP,3,2816,0 ESTC,18,161603,-3 Average,18,287821,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $137 million in EPR's case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 3 bullish hedge fund positions. EPR Properties (NYSE:EPR) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately EPR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EPR investors were disappointed as the stock returned 3.5% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.