We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether American Campus Communities, Inc. (NYSE:ACC) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is American Campus Communities, Inc. (NYSE:ACC) ready to rally soon? Hedge funds are selling. The number of bullish hedge fund positions decreased by 1 in recent months. Our calculations also showed that ACC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_758429" align="aligncenter" width="399"] Ric Dillon of Diamond Hill Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's take a peek at the new hedge fund action encompassing American Campus Communities, Inc. (NYSE:ACC).
What have hedge funds been doing with American Campus Communities, Inc. (NYSE:ACC)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in ACC 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.
Among these funds, Citadel Investment Group held the most valuable stake in American Campus Communities, Inc. (NYSE:ACC), which was worth $93.7 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $93 million worth of shares. Balyasny Asset Management, D E Shaw, and Echo Street Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to American Campus Communities, Inc. (NYSE:ACC), around 0.47% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, designating 0.38 percent of its 13F equity portfolio to ACC.
Because American Campus Communities, Inc. (NYSE:ACC) has experienced a decline in interest from the smart money, it's safe to say that there exists a select few funds that slashed their positions entirely by the end of the third quarter. At the top of the heap, George Baxter's Sabrepoint Capital dumped the largest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $4.3 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also dumped its stock, about $4.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to American Campus Communities, Inc. (NYSE:ACC). These stocks are Oshkosh Corporation (NYSE:OSK), Brixmor Property Group Inc (NYSE:BRX), InterXion Holding NV (NYSE:INXN), and Flex Ltd. (NASDAQ:FLEX). This group of stocks' market caps match ACC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OSK,28,406897,2 BRX,16,147201,-1 INXN,60,1328786,27 FLEX,34,1581224,0 Average,34.5,866027,7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $342 million in ACC's case. InterXion Holding NV (NYSE:INXN) is the most popular stock in this table. On the other hand Brixmor Property Group Inc (NYSE:BRX) is the least popular one with only 16 bullish hedge fund positions. American Campus Communities, Inc. (NYSE:ACC) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately ACC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ACC investors were disappointed as the stock returned -44.5% during the same time period 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 most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.