Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Simon Property Group, Inc (NYSE:SPG) a buy here? Money managers are buying. The number of long hedge fund bets inched up by 1 lately. Our calculations also showed that SPG isn't among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are assumed to be underperforming, old investment tools of years past. While there are over 8000 funds in operation at present, Our researchers hone in on the masters of this club, about 750 funds. Most estimates calculate that this group of people orchestrate the lion's share of all hedge funds' total asset base, and by watching their best stock picks, Insider Monkey has brought to light numerous investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's view the recent hedge fund action surrounding Simon Property Group, Inc (NYSE:SPG).
What does the smart money think about Simon Property Group, Inc (NYSE:SPG)?
Heading into the first quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in SPG a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Simon Property Group, Inc (NYSE:SPG) was held by AEW Capital Management, which reported holding $294.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $105.9 million position. Other investors bullish on the company included D E Shaw, Adage Capital Management, and Two Sigma Advisors.
As industrywide interest jumped, some big names were leading the bulls' herd. Bridgewater Associates, managed by Ray Dalio, created the largest position in Simon Property Group, Inc (NYSE:SPG). Bridgewater Associates had $5.8 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $2.4 million position during the quarter. The other funds with brand new SPG positions are Deepak Gulati's Argentiere Capital, Joel Greenblatt's Gotham Asset Management, and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Simon Property Group, Inc (NYSE:SPG) but similarly valued. We will take a look at Vodafone Group Plc (NASDAQ:VOD), Colgate-Palmolive Company (NYSE:CL), Intuit Inc. (NASDAQ:INTU), and EOG Resources Inc (NYSE:EOG). This group of stocks' market valuations are closest to SPG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VOD,18,626912,0 CL,45,1865501,12 INTU,39,1755219,-4 EOG,37,520441,0 Average,34.75,1192018,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $1192 million. That figure was $724 million in SPG's case. Colgate-Palmolive Company (NYSE:CL) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 18 bullish hedge fund positions. Simon Property Group, Inc (NYSE:SPG) 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 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately SPG wasn't in this group. Hedge funds that bet on SPG were disappointed as the stock returned 6.0% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.