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World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Hedge fund interest in Medical Properties Trust, Inc. (NYSE:MPW) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as YPF Sociedad Anonima (NYSE:YPF), Axalta Coating Systems Ltd (NYSE:AXTA), and Insulet Corporation (NASDAQ:PODD) to gather more data points. Our calculations also showed that MPW isn't among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's review the key hedge fund action encompassing Medical Properties Trust, Inc. (NYSE:MPW).
How are hedge funds trading Medical Properties Trust, Inc. (NYSE:MPW)?
At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MPW over the last 16 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of Medical Properties Trust, Inc. (NYSE:MPW), with a stake worth $115.5 million reported as of the end of March. Trailing Cardinal Capital was Winton Capital Management, which amassed a stake valued at $25.7 million. Waterfront Capital Partners, PEAK6 Capital Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Medical Properties Trust, Inc. (NYSE:MPW) has experienced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers who sold off their full holdings last quarter. At the top of the heap, Renaissance Technologies dumped the largest position of all the hedgies monitored by Insider Monkey, worth close to $37.9 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund said goodbye to about $2.7 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Medical Properties Trust, Inc. (NYSE:MPW). We will take a look at YPF Sociedad Anonima (NYSE:YPF), Axalta Coating Systems Ltd (NYSE:AXTA), Insulet Corporation (NASDAQ:PODD), and Berry Global Group Inc (NYSE:BERY). This group of stocks' market values are similar to MPW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YPF,15,70155,-6 AXTA,41,2287075,-2 PODD,24,390580,4 BERY,40,2294462,0 Average,30,1260568,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1261 million. That figure was $170 million in MPW's case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand YPF Sociedad Anonima (NYSE:YPF) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Medical Properties Trust, Inc. (NYSE:MPW) is even less popular than YPF. Hedge funds clearly dropped the ball on MPW 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on MPW as the stock returned 13.7% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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