Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards UMH Properties, Inc (NYSE:UMH) to find out whether it was one of their high conviction long-term ideas.
UMH Properties, Inc (NYSE:UMH) was in 8 hedge funds' portfolios at the end of December. UMH has experienced a decrease in enthusiasm from smart money in recent months. There were 9 hedge funds in our database with UMH holdings at the end of the previous quarter. Our calculations also showed that UMH 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.
Let's take a look at the fresh hedge fund action regarding UMH Properties, Inc (NYSE:UMH).
How have hedgies been trading UMH Properties, Inc (NYSE:UMH)?
At Q4's end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in UMH a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Millennium Management, managed by Israel Englander, holds the biggest position in UMH Properties, Inc (NYSE:UMH). Millennium Management has a $5.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Millennium Management's heels is Peter Schliemann of Rutabaga Capital Management, with a $4.1 million position; 1.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Jim Simons's Renaissance Technologies, Paul Marshall and Ian Wace's Marshall Wace LLP and D. E. Shaw's D E Shaw.
Judging by the fact that UMH Properties, Inc (NYSE:UMH) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few hedgies who sold off their full holdings heading into Q3. At the top of the heap, Ken Grossman and Glen Schneider's SG Capital Management dropped the biggest stake of the 700 funds followed by Insider Monkey, valued at an estimated $1 million in stock, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund said goodbye to about $0.6 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as UMH Properties, Inc (NYSE:UMH) but similarly valued. These stocks are NII Holdings, Inc. (NASDAQ:NIHD), Clementia Pharmaceuticals Inc. (NASDAQ:CMTA), Innovative Industrial Properties, Inc. (NYSE:IIPR), and On Deck Capital Inc (NYSE:ONDK). This group of stocks' market values are similar to UMH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NIHD,18,117146,1 CMTA,12,216373,2 IIPR,8,18371,0 ONDK,20,119246,-1 Average,14.5,117784,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $14 million in UMH's case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Innovative Industrial Properties, Inc. (NYSE:IIPR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks UMH Properties, Inc (NYSE:UMH) is even less popular than IIPR. 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. A small number of hedge funds were also right about betting on UMH, though not to the same extent, as the stock returned 17% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.