Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Simon Property Group, Inc (NYSE:SPG)? The smart money sentiment can provide an answer to this question.
Simon Property Group, Inc (NYSE:SPG) was in 26 hedge funds' portfolios at the end of December. SPG investors should be aware of a decrease in hedge fund interest in recent months. There were 29 hedge funds in our database with SPG holdings at the end of the previous quarter. Our calculations also showed that SPG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are seen as slow, old investment tools of yesteryear. While there are greater than 8000 funds in operation at the moment, Our experts choose to focus on the moguls of this club, around 850 funds. Most estimates calculate that this group of people direct the majority of the hedge fund industry's total capital, and by paying attention to their highest performing stock picks, Insider Monkey has spotted many investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_673876" align="aligncenter" width="400"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind we're going to go over the recent hedge fund action regarding Simon Property Group, Inc (NYSE:SPG).
Hedge fund activity in Simon Property Group, Inc (NYSE:SPG)
At Q4's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the third quarter of 2019. On the other hand, there were a total of 26 hedge funds with a bullish position in SPG a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the most valuable position in Simon Property Group, Inc (NYSE:SPG). Two Sigma Advisors has a $161.7 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $133.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions consist of Renaissance Technologies, Phill Gross and Robert Atchinson's Adage Capital Management and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position Pittencrieff Partners - Gabalex Capital allocated the biggest weight to Simon Property Group, Inc (NYSE:SPG), around 3.9% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, dishing out 3.03 percent of its 13F equity portfolio to SPG.
Because Simon Property Group, Inc (NYSE:SPG) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of fund managers that elected to cut their positions entirely heading into Q4. Interestingly, Ray Dalio's Bridgewater Associates said goodbye to the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $25.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also cut its stock, about $18.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Simon Property Group, Inc (NYSE:SPG). We will take a look at UBS Group AG (NYSE:UBS), Activision Blizzard, Inc. (NASDAQ:ATVI), Banco Santander (Brasil) SA (NYSE:BSBR), and Moody's Corporation (NYSE:MCO). This group of stocks' market valuations are closest to SPG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBS,14,1045423,-2 ATVI,76,2811204,3 BSBR,8,91437,-7 MCO,49,9218123,-6 Average,36.75,3291547,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $3292 million. That figure was $580 million in SPG's case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 8 bullish hedge fund positions. Simon Property Group, Inc (NYSE:SPG) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately SPG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SPG investors were disappointed as the stock returned -30.8% during the same time period 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 Q1.
Disclosure: None. This article was originally published at Insider Monkey.