Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 18.7% compared to 12.1%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
National Storage Affiliates Trust (NYSE:NSA) was in 16 hedge funds' portfolios at the end of March. NSA investors should be aware of a decrease in support from the world's most elite money managers recently. There were 17 hedge funds in our database with NSA positions at the end of the previous quarter. Our calculations also showed that NSA isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.
We're going to review the key hedge fund action encompassing National Storage Affiliates Trust (NYSE:NSA).
What does smart money think about National Storage Affiliates Trust (NYSE:NSA)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in NSA over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the number one position in National Storage Affiliates Trust (NYSE:NSA). Renaissance Technologies has a $41.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is David Harding of Winton Capital Management, with a $18.6 million position; 0.4% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Israel Englander's Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Ken Griffin's Citadel Investment Group.
Seeing as National Storage Affiliates Trust (NYSE:NSA) has faced falling interest from the smart money, we can see that there lies a certain "tier" of funds that slashed their positions entirely heading into Q3. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management dumped the largest stake of the 700 funds tracked by Insider Monkey, valued at close to $1.3 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as National Storage Affiliates Trust (NYSE:NSA) but similarly valued. These stocks are Harsco Corporation (NYSE:HSC), Hovnanian Enterprises, Inc. (NYSE:HOV), Blucora Inc (NASDAQ:BCOR), and Opko Health Inc. (NASDAQ:OPK). This group of stocks' market caps match NSA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSC,19,102389,-5 HOV,3,3359,-6 BCOR,12,137883,1 OPK,13,21755,-2 Average,11.75,66347,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $94 million in NSA's case. Harsco Corporation (NYSE:HSC) is the most popular stock in this table. On the other hand Hovnanian Enterprises, Inc. (NYSE:HOV) is the least popular one with only 3 bullish hedge fund positions. National Storage Affiliates Trust (NYSE:NSA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on NSA, though not to the same extent, as the stock returned 4.9% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.