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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Lexington Realty Trust (NYSE:LXP).
Is LXP a good stock to buy now? Lexington Realty Trust (NYSE:LXP) investors should pay attention to an increase in hedge fund interest recently. Lexington Realty Trust (NYSE:LXP) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. Our calculations also showed that LXP 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 today’s marketplace there are many methods investors put to use to assess publicly traded companies. A pair of the less utilized methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can beat the market by a significant amount (see the details here).
David Siegel of Two Sigma Advisors
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 let's go over the key hedge fund action surrounding Lexington Realty Trust (NYSE:LXP).
Do Hedge Funds Think LXP Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 70% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LXP over the last 21 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.
Among these funds, Forward Management held the most valuable stake in Lexington Realty Trust (NYSE:LXP), which was worth $14.3 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $13.4 million worth of shares. Winton Capital Management, GLG Partners, and Royce & Associates 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 Forward Management allocated the biggest weight to Lexington Realty Trust (NYSE:LXP), around 2.37% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to LXP.
As industrywide interest jumped, specific money managers have been driving this bullishness. Renaissance Technologies, established the most outsized position in Lexington Realty Trust (NYSE:LXP). Renaissance Technologies had $2.7 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw's D E Shaw, Ken Griffin's Citadel Investment Group, and Thomas Bailard's Bailard Inc.
Let's check out hedge fund activity in other stocks similar to Lexington Realty Trust (NYSE:LXP). We will take a look at Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Youdao, Inc. (NYSE:DAO), Crocs, Inc. (NASDAQ:CROX), Immunovant, Inc. (NASDAQ:IMVT), BMC Stock Holdings, Inc. (NASDAQ:BMCH), Momo Inc (NASDAQ:MOMO), and Digital Turbine Inc (NASDAQ:APPS). This group of stocks' market caps are similar to LXP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DCPH,30,629607,-1 DAO,10,290560,-3 CROX,35,653957,-2 IMVT,29,562531,-2 BMCH,31,571107,5 MOMO,30,362883,-4 APPS,23,332289,5 Average,26.9,486133,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $486 million. That figure was $49 million in LXP's case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Youdao, Inc. (NYSE:DAO) is the least popular one with only 10 bullish hedge fund positions. Lexington Realty Trust (NYSE:LXP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LXP is 49.5. 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 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately LXP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LXP investors were disappointed as the stock returned 2.9% since the end of September (through 12/14) 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 2020.
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Disclosure: None. This article was originally published at Insider Monkey.