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Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. Is UDR, Inc. (NYSE:UDR) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is UDR, Inc. (NYSE:UDR) an attractive investment right now? Hedge funds are in a pessimistic mood. The number of long hedge fund positions were cut by 4 recently. Our calculations also showed that UDR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). UDR was in 21 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 25 hedge funds in our database with UDR positions at the end of the previous quarter.
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.
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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. With all of this in mind we're going to analyze the recent hedge fund action regarding UDR, Inc. (NYSE:UDR).
Hedge fund activity in UDR, Inc. (NYSE:UDR)
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards UDR over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in UDR, Inc. (NYSE:UDR), which was worth $231.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $53 million worth of shares. Echo Street Capital Management, Adage Capital Management, and Winton 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 Echo Street Capital Management allocated the biggest weight to UDR, Inc. (NYSE:UDR), around 0.26% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to UDR.
Due to the fact that UDR, Inc. (NYSE:UDR) has experienced falling interest from hedge fund managers, it's safe to say that there is a sect of fund managers that decided to sell off their full holdings in the third quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management dumped the largest stake of the "upper crust" of funds monitored by Insider Monkey, totaling about $37.9 million in stock, and Ken Heebner's Capital Growth Management was right behind this move, as the fund said goodbye to about $5.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to UDR, Inc. (NYSE:UDR). We will take a look at Extra Space Storage, Inc. (NYSE:EXR), Sasol Limited (NYSE:SSL), EXACT Sciences Corporation (NASDAQ:EXAS), and Qorvo Inc (NASDAQ:QRVO). This group of stocks' market values are similar to UDR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXR,28,206461,-2 SSL,7,16214,-2 EXAS,41,914942,2 QRVO,45,1784158,7 Average,30.25,730444,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $730 million. That figure was $361 million in UDR's case. Qorvo Inc (NASDAQ:QRVO) 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. UDR, Inc. (NYSE:UDR) 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 UDR as the stock returned -20.6% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.