Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Monmouth R.E. Inv. Corp. (NYSE:MNR)? The smart money sentiment can provide an answer to this question.
Is Monmouth R.E. Inv. Corp. (NYSE:MNR) a safe stock to buy now? Hedge funds are getting more optimistic. The number of long hedge fund positions went up by 1 lately. Our calculations also showed that MNR isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
We're going to review the recent hedge fund action surrounding Monmouth R.E. Inv. Corp. (NYSE:MNR).
What does the smart money think about Monmouth R.E. Inv. Corp. (NYSE:MNR)?
At Q4's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in MNR a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Monmouth R.E. Inv. Corp. (NYSE:MNR), which was worth $36.5 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $8.4 million worth of shares. Moreover, Arrowstreet Capital, Citadel Investment Group, and Millennium Management were also bullish on Monmouth R.E. Inv. Corp. (NYSE:MNR), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. D E Shaw, managed by D. E. Shaw, assembled the most outsized position in Monmouth R.E. Inv. Corp. (NYSE:MNR). D E Shaw had $0.6 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $0.3 million investment in the stock during the quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Monmouth R.E. Inv. Corp. (NYSE:MNR) but similarly valued. We will take a look at Gulfport Energy Corporation (NASDAQ:GPOR), PennyMac Mortgage Investment Trust (NYSE:PMT), Hecla Mining Company (NYSE:HL), and Myovant Sciences Ltd. (NYSE:MYOV). This group of stocks' market values resemble MNR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPOR,22,129057,2 PMT,11,18567,4 HL,9,14554,-2 MYOV,5,81654,-2 Average,11.75,60958,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $63 million in MNR's case. Gulfport Energy Corporation (NASDAQ:GPOR) is the most popular stock in this table. On the other hand Myovant Sciences Ltd. (NYSE:MYOV) is the least popular one with only 5 bullish hedge fund positions. Monmouth R.E. Inv. Corp. (NYSE:MNR) 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 MNR wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); MNR investors were disappointed as the stock returned 6.4% 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.