Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Physicians Realty Trust (NYSE:DOC) from the perspective of those elite funds.
Physicians Realty Trust (NYSE:DOC) shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that DOC isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a peek at the latest hedge fund action surrounding Physicians Realty Trust (NYSE:DOC).
What does smart money think about Physicians Realty Trust (NYSE:DOC)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in DOC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Physicians Realty Trust (NYSE:DOC), with a stake worth $40.1 million reported as of the end of March. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $25.8 million. Hudson Bay Capital Management, Sandler Capital Management, and Alyeska Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Since Physicians Realty Trust (NYSE:DOC) has witnessed bearish sentiment from the smart money, it's easy to see that there lies a certain "tier" of hedge funds who sold off their full holdings last quarter. Intriguingly, Ken Heebner's Capital Growth Management cut the largest stake of the "upper crust" of funds tracked by Insider Monkey, worth close to $3.5 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $0 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Physicians Realty Trust (NYSE:DOC) but similarly valued. These stocks are The Boston Beer Company Inc (NYSE:SAM), Spirit Realty Capital Inc (NYSE:SRC), FireEye Inc (NASDAQ:FEYE), and Copa Holdings, S.A. (NYSE:CPA). This group of stocks' market caps resemble DOC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAM,22,386611,3 SRC,17,301040,-2 FEYE,27,365577,-1 CPA,14,262939,-1 Average,20,329042,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $329 million. That figure was $106 million in DOC's case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Copa Holdings, S.A. (NYSE:CPA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Physicians Realty Trust (NYSE:DOC) is even less popular than CPA. Hedge funds dodged a bullet by taking a bearish stance towards DOC. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately DOC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DOC investors were disappointed as the stock returned -1.6% during the same time frame 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 the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.