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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Retail Properties of America Inc (NYSE:RPAI).
Is RPAI a good stock to buy now? The smart money was becoming less hopeful. The number of long hedge fund positions went down by 1 in recent months. Retail Properties of America Inc (NYSE:RPAI) was in 10 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 25. Our calculations also showed that RPAI 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck 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. Keeping this in mind let's take a look at the new hedge fund action encompassing Retail Properties of America Inc (NYSE:RPAI).
Do Hedge Funds Think RPAI Is A Good Stock To Buy Now?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2020. On the other hand, there were a total of 25 hedge funds with a bullish position in RPAI a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Retail Properties of America Inc (NYSE:RPAI), with a stake worth $25.9 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $7.5 million. Two Sigma Advisors, AQR Capital Management, and D E Shaw 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 GLG Partners allocated the biggest weight to Retail Properties of America Inc (NYSE:RPAI), around 0.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to RPAI.
Judging by the fact that Retail Properties of America Inc (NYSE:RPAI) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers who sold off their full holdings by the end of the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, comprising close to $5.8 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund sold off about $0.6 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Retail Properties of America Inc (NYSE:RPAI) but similarly valued. We will take a look at CVR Energy, Inc. (NYSE:CVI), National Research Corporation (NASDAQ:NRC), LexinFintech Holdings Ltd. (NASDAQ:LX), Fluor Corporation (NYSE:FLR), Compass Diversified Holdings (NYSE:CODI), PDC Energy Inc (NASDAQ:PDCE), and First Midwest Bancorp Inc (NASDAQ:FMBI). This group of stocks' market caps match RPAI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVI,18,937150,0 NRC,6,38451,-1 LX,10,11980,-4 FLR,17,84394,-3 CODI,3,15974,-1 PDCE,24,211888,1 FMBI,17,43845,6 Average,13.6,191955,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $39 million in RPAI's case. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table. On the other hand Compass Diversified Holdings (NYSE:CODI) is the least popular one with only 3 bullish hedge fund positions. Retail Properties of America Inc (NYSE:RPAI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RPAI is 32.7. 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. 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 RPAI as the stock returned 54.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.