Is Sun Communities Inc (NYSE:SUI) 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 Sun Communities Inc (NYSE:SUI) going to take off soon? The best stock pickers are reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 1 recently. Our calculations also showed that SUI 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 view the recent hedge fund action surrounding Sun Communities Inc (NYSE:SUI).
How are hedge funds trading Sun Communities Inc (NYSE:SUI)?
At Q4's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SUI over the last 14 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Sun Communities Inc (NYSE:SUI), with a stake worth $158.6 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $60 million. Millennium Management, Zimmer Partners, and Waratah Capital Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Sun Communities Inc (NYSE:SUI) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds that elected to cut their full holdings heading into Q3. It's worth mentioning that Clint Carlson's Carlson Capital dumped the largest stake of all the hedgies tracked by Insider Monkey, worth about $22.4 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund said goodbye to about $12.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Sun Communities Inc (NYSE:SUI) but similarly valued. We will take a look at Qurate Retail, Inc. (NASDAQ:QRTEA), Open Text Corporation (NASDAQ:OTEX), PerkinElmer, Inc. (NYSE:PKI), and Federal Realty Investment Trust (NYSE:FRT). This group of stocks' market values match SUI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QRTEA,35,959633,-1 OTEX,20,617398,1 PKI,19,898510,-4 FRT,17,234541,-4 Average,22.75,677521,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $678 million. That figure was $492 million in SUI's case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand Federal Realty Investment Trust (NYSE:FRT) is the least popular one with only 17 bullish hedge fund positions. Sun Communities Inc (NYSE:SUI) 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. Hedge funds were also right about betting on SUI, though not to the same extent, as the stock returned 16.2% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.