Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Franklin Street Properties Corp. (NYSE:FSP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Franklin Street Properties Corp. (NYSE:FSP) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that FSP 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/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 glance at the new hedge fund action regarding Franklin Street Properties Corp. (NYSE:FSP).
Hedge fund activity in Franklin Street Properties Corp. (NYSE:FSP)
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. By comparison, 7 hedge funds held shares or bullish call options in FSP a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Franklin Street Properties Corp. (NYSE:FSP), which was worth $29.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $8.1 million worth of shares. AQR Capital Management, Two Sigma Advisors, and Citadel Investment Group 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 Renaissance Technologies allocated the biggest weight to Franklin Street Properties Corp. (NYSE:FSP), around 0.02% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to FSP.
As one would reasonably expect, specific money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, established the largest position in Franklin Street Properties Corp. (NYSE:FSP). Millennium Management had $0.1 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks similar to Franklin Street Properties Corp. (NYSE:FSP). These stocks are Standex Int'l Corp. (NYSE:SXI), Sunnova Energy International Inc. (NYSE:NOVA), CNX Midstream Partners LP (NYSE:CNXM), and BrightSphere Investment Group Inc. (NYSE:BSIG). This group of stocks' market valuations are similar to FSP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SXI,16,43739,7 NOVA,9,60529,9 CNXM,6,13254,1 BSIG,21,274795,2 Average,13,98079,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $42 million in FSP's case. BrightSphere Investment Group Inc. (NYSE:BSIG) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 6 bullish hedge fund positions. Franklin Street Properties Corp. (NYSE:FSP) 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 FSP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FSP investors were disappointed as the stock returned 4% 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.