It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Saul Centers Inc (NYSE:BFS).
Saul Centers Inc (NYSE:BFS) has experienced a decrease in hedge fund sentiment lately. BFS was in 9 hedge funds' portfolios at the end of June. There were 10 hedge funds in our database with BFS holdings at the end of the previous quarter. Our calculations also showed that BFS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We're going to take a look at the fresh hedge fund action surrounding Saul Centers Inc (NYSE:BFS).
What have hedge funds been doing with Saul Centers Inc (NYSE:BFS)?
At Q2's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BFS over the last 16 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, Renaissance Technologies held the most valuable stake in Saul Centers Inc (NYSE:BFS), which was worth $28.1 million at the end of the second quarter. On the second spot was Millennium Management which amassed $4.6 million worth of shares. Moreover, GLG Partners, Citadel Investment Group, and Two Sigma Advisors were also bullish on Saul Centers Inc (NYSE:BFS), allocating a large percentage of their portfolios to this stock.
Seeing as Saul Centers Inc (NYSE:BFS) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of money managers that slashed their entire stakes last quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management dumped the largest position of the "upper crust" of funds followed by Insider Monkey, worth an estimated $1.6 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund said goodbye to about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Saul Centers Inc (NYSE:BFS). These stocks are Kite Realty Group Trust (NYSE:KRG), Nexa Resources S.A. (NYSE:NEXA), OceanFirst Financial Corp. (NASDAQ:OCFC), and PRA Group, Inc. (NASDAQ:PRAA). This group of stocks' market valuations are similar to BFS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRG,6,53962,0 NEXA,9,10148,-2 OCFC,13,64180,0 PRAA,8,27127,-3 Average,9,38854,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $41 million in BFS's case. OceanFirst Financial Corp. (NASDAQ:OCFC) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 6 bullish hedge fund positions. Saul Centers Inc (NYSE:BFS) is not the least popular stock in this group but hedge fund interest is still below average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BFS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BFS investors were disappointed as the stock returned -1.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.