Is Independence Realty Trust Inc (NYSE:IRT) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Independence Realty Trust Inc (NYSE:IRT) the right investment to pursue these days? Investors who are in the know are becoming less confident. The number of bullish hedge fund bets shrunk by 2 lately. Our calculations also showed that irt isn't among the 30 most popular stocks among hedge funds. IRT was in 9 hedge funds' portfolios at the end of December. There were 11 hedge funds in our database with IRT 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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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 Independence Realty Trust Inc (NYSE:IRT).
What have hedge funds been doing with Independence Realty Trust Inc (NYSE:IRT)?
At Q4's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in IRT a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Independence Realty Trust Inc (NYSE:IRT), which was worth $30.7 million at the end of the fourth quarter. On the second spot was Ancora Advisors which amassed $10.3 million worth of shares. Moreover, Highland Capital Management, Citadel Investment Group, and BlueCrest Capital Mgmt. were also bullish on Independence Realty Trust Inc (NYSE:IRT), allocating a large percentage of their portfolios to this stock.
Because Independence Realty Trust Inc (NYSE:IRT) has witnessed bearish sentiment from hedge fund managers, logic holds that there is a sect of hedge funds who were dropping their full holdings in the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, worth about $0.4 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dropped its stock, about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Independence Realty Trust Inc (NYSE:IRT) but similarly valued. We will take a look at Penn Virginia Corporation (NASDAQ:PVAC), Douglas Dynamics Inc (NYSE:PLOW), Knoll Inc (NYSE:KNL), and Entercom Communications Corp. (NYSE:ETM). This group of stocks' market valuations are closest to IRT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PVAC,16,274325,-5 PLOW,7,7515,1 KNL,22,60960,8 ETM,16,120292,2 Average,15.25,115773,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $51 million in IRT's case. Knoll Inc (NYSE:KNL) is the most popular stock in this table. On the other hand Douglas Dynamics Inc (NYSE:PLOW) is the least popular one with only 7 bullish hedge fund positions. Independence Realty Trust Inc (NYSE:IRT) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately IRT wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); IRT investors were disappointed as the stock returned 12.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
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