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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Independence Realty Trust Inc (NYSE:IRT).
Is IRT a good stock to buy now? Independence Realty Trust Inc (NYSE:IRT) shareholders have witnessed an increase in activity from the world's largest hedge funds lately. Independence Realty Trust Inc (NYSE:IRT) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 22. There were 8 hedge funds in our database with IRT positions at the end of the second quarter. Our calculations also showed that IRT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
James Dondero of Highland Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we're going to take a look at the fresh hedge fund action surrounding Independence Realty Trust Inc (NYSE:IRT).
Do Hedge Funds Think IRT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IRT over the last 21 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 upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Independence Realty Trust Inc (NYSE:IRT) was held by Renaissance Technologies, which reported holding $52.9 million worth of stock at the end of September. It was followed by Hill Winds Capital with a $5.4 million position. Other investors bullish on the company included Highland Capital Management, AQR Capital Management, and Ancora Advisors. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Independence Realty Trust Inc (NYSE:IRT), around 4.29% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, earmarking 1.11 percent of its 13F equity portfolio to IRT.
As aggregate interest increased, key money managers have jumped into Independence Realty Trust Inc (NYSE:IRT) headfirst. Millennium Management, managed by Israel Englander, created the biggest position in Independence Realty Trust Inc (NYSE:IRT). Millennium Management had $0.8 million invested in the company at the end of the quarter. Kamyar Khajavi's MIK Capital also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new IRT position is Benjamin A. Smith's Laurion Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Independence Realty Trust Inc (NYSE:IRT) but similarly valued. We will take a look at Harsco Corporation (NYSE:HSC), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), Griffon Corporation (NYSE:GFF), NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), Calix Inc (NYSE:CALX), Getty Realty Corp. (NYSE:GTY), and Realogy Holdings Corp (NYSE:RLGY). This group of stocks' market valuations are closest to IRT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSC,13,41442,-2 SUPN,19,150824,0 GFF,24,181124,15 NGM,12,84327,0 CALX,24,192934,7 GTY,12,64547,5 RLGY,27,293185,3 Average,18.7,144055,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $67 million in IRT's case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Independence Realty Trust Inc (NYSE:IRT) is even less popular than NGM. Our overall hedge fund sentiment score for IRT is 18.3. 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. Hedge funds clearly dropped the ball on IRT as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on IRT as the stock returned 15.9% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.