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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Extra Space Storage, Inc. (NYSE:EXR) based on that data.
Extra Space Storage, Inc. (NYSE:EXR) was in 28 hedge funds' portfolios at the end of December. EXR investors should pay attention to a decrease in enthusiasm from smart money recently. There were 30 hedge funds in our database with EXR holdings at the end of the previous quarter. Our calculations also showed that EXR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_340081" align="aligncenter" width="400"] Phill Gross of Adage Capital Management[/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. Keeping this in mind we're going to go over the new hedge fund action regarding Extra Space Storage, Inc. (NYSE:EXR).
Hedge fund activity in Extra Space Storage, Inc. (NYSE:EXR)
At Q4's end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EXR over the last 18 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.
The largest stake in Extra Space Storage, Inc. (NYSE:EXR) was held by Millennium Management, which reported holding $48.9 million worth of stock at the end of September. It was followed by D E Shaw with a $37.6 million position. Other investors bullish on the company included Marshall Wace LLP, Adage Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Pinz Capital allocated the biggest weight to Extra Space Storage, Inc. (NYSE:EXR), around 0.85% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 0.55 percent of its 13F equity portfolio to EXR.
Due to the fact that Extra Space Storage, Inc. (NYSE:EXR) has witnessed bearish sentiment from the smart money, it's easy to see that there is a sect of funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, Stuart J. Zimmer's Zimmer Partners dropped the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $11.7 million in stock. Eduardo Abush's fund, Waterfront Capital Partners, also dropped its stock, about $5.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to Extra Space Storage, Inc. (NYSE:EXR). We will take a look at Sasol Limited (NYSE:SSL), EXACT Sciences Corporation (NASDAQ:EXAS), Qorvo Inc (NASDAQ:QRVO), and Twilio Inc. (NYSE:TWLO). This group of stocks' market values are closest to EXR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSL,7,16214,-2 EXAS,41,914942,2 QRVO,45,1784158,7 TWLO,60,2100922,-3 Average,38.25,1204059,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $1204 million. That figure was $206 million in EXR's case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 7 bullish hedge fund positions. Extra Space Storage, Inc. (NYSE:EXR) is not the least popular stock in this group but hedge fund interest is still below average. 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 still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on EXR as the stock returned -22% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.