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Is IIPR Stock A Buy or Sell?

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·6 min read
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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Innovative Industrial Properties, Inc. (NYSE:IIPR).

Is IIPR stock a buy? Innovative Industrial Properties, Inc. (NYSE:IIPR) investors should be aware of an increase in hedge fund sentiment of late. Innovative Industrial Properties, Inc. (NYSE:IIPR) was in 23 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with IIPR holdings at the end of September. Our calculations also showed that IIPR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

According to most market participants, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are over 8000 funds trading at present, We hone in on the top tier of this club, about 850 funds. These investment experts have their hands on most of the hedge fund industry's total asset base, and by keeping track of their best stock picks, Insider Monkey has discovered numerous investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a glance at the new hedge fund action regarding Innovative Industrial Properties, Inc. (NYSE:IIPR).

Do Hedge Funds Think IIPR Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in IIPR a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Zimmer Partners was the largest shareholder of Innovative Industrial Properties, Inc. (NYSE:IIPR), with a stake worth $164.8 million reported as of the end of December. Trailing Zimmer Partners was CaaS Capital, which amassed a stake valued at $29.4 million. Arrowstreet Capital, Citadel Investment Group, and Waterfront Capital Partners 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 Zimmer Partners allocated the biggest weight to Innovative Industrial Properties, Inc. (NYSE:IIPR), around 2.42% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, earmarking 1.41 percent of its 13F equity portfolio to IIPR.

Consequently, key hedge funds were breaking ground themselves. CaaS Capital, managed by Frank Fu, initiated the largest position in Innovative Industrial Properties, Inc. (NYSE:IIPR). CaaS Capital had $29.4 million invested in the company at the end of the quarter. George McCabe's Portolan Capital Management also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new IIPR investors: Allon Hellmann's Full18 Capital, Alec Litowitz and Ross Laser's Magnetar Capital, and Paul Tudor Jones's Tudor Investment Corp.

Let's also examine hedge fund activity in other stocks similar to Innovative Industrial Properties, Inc. (NYSE:IIPR). These stocks are Simpson Manufacturing Co, Inc. (NYSE:SSD), Cannae Holdings, Inc. (NYSE:CNNE), Atlantica Sustainable Infrastructure plc (NASDAQ:AY), Hexcel Corporation (NYSE:HXL), Bank OZK (NASDAQ:OZK), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), and Park Hotels & Resorts Inc. (NYSE:PK). This group of stocks' market valuations are similar to IIPR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSD,25,219735,8 CNNE,34,534239,5 AY,14,98156,3 HXL,25,166619,5 OZK,20,260732,0 AJRD,36,802349,10 PK,13,112554,-4 Average,23.9,313483,3.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $318 million in IIPR's case. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is the most popular stock in this table. On the other hand Park Hotels & Resorts Inc. (NYSE:PK) is the least popular one with only 13 bullish hedge fund positions. Innovative Industrial Properties, Inc. (NYSE:IIPR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IIPR is 59.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately IIPR wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); IIPR investors were disappointed as the stock returned -0.5% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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