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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Essex Property Trust Inc (NYSE:ESS).
Essex Property Trust Inc (NYSE:ESS) has experienced an increase in support from the world's most elite money managers recently. Essex Property Trust Inc (NYSE:ESS) was in 30 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. There were 25 hedge funds in our database with ESS positions at the end of the fourth quarter. Our calculations also showed that ESS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 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.
Clint Carlson of Carlson Capital
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Do Hedge Funds Think ESS Is A Good Stock To Buy Now?
At the end of March, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in ESS a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Waterfront Capital Partners held the most valuable stake in Essex Property Trust Inc (NYSE:ESS), which was worth $32 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $29 million worth of shares. Renaissance Technologies, Adage Capital Management, and Echo Street Capital Management 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 Masterton Capital Management allocated the biggest weight to Essex Property Trust Inc (NYSE:ESS), around 5.39% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, designating 2.9 percent of its 13F equity portfolio to ESS.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Echo Street Capital Management, managed by Greg Poole, initiated the biggest position in Essex Property Trust Inc (NYSE:ESS). Echo Street Capital Management had $19 million invested in the company at the end of the quarter. Clint Carlson's Carlson Capital also initiated a $13 million position during the quarter. The following funds were also among the new ESS investors: Anand Parekh's Alyeska Investment Group, Matthew Crandall Gilman's Hill Winds Capital, and Andrew Weiss's Weiss Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Essex Property Trust Inc (NYSE:ESS) but similarly valued. These stocks are Warner Music Group Corp. (NASDAQ:WMG), Logitech International SA (NASDAQ:LOGI), Extra Space Storage, Inc. (NYSE:EXR), CureVac N.V. (NASDAQ:CVAC), SK Telecom Co., Ltd. (NYSE:SKM), Ulta Beauty, Inc. (NASDAQ:ULTA), and Shinhan Financial Group Co., Ltd. (NYSE:SHG). This group of stocks' market valuations are similar to ESS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WMG,27,839309,-2 LOGI,15,311298,-6 EXR,28,185472,-1 CVAC,9,36312,0 SKM,8,113876,4 ULTA,46,1438287,3 SHG,6,29688,-1 Average,19.9,422035,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $422 million. That figure was $197 million in ESS's case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 6 bullish hedge fund positions. Essex Property Trust Inc (NYSE:ESS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ESS is 67.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on ESS, though not to the same extent, as the stock returned 13.3% since Q1 (through July 2nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.