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 37.4% compared to 27.5%, 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.
Is Ventas, Inc. (NYSE:VTR) a good investment right now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions retreated by 4 in recent months. Our calculations also showed that VTR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). VTR was in 14 hedge funds' portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with VTR positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the elite of this group, around 750 funds. Most estimates calculate that this group of people orchestrate bulk of all hedge funds' total capital, and by observing their matchless investments, Insider Monkey has come up with various investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_746830" align="aligncenter" width="473"] Matthew Hulsizer of PEAK6 Capital[/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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's check out the new hedge fund action encompassing Ventas, Inc. (NYSE:VTR).
How are hedge funds trading Ventas, Inc. (NYSE:VTR)?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in VTR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ventas, Inc. (NYSE:VTR) was held by Renaissance Technologies, which reported holding $288.1 million worth of stock at the end of September. It was followed by Adage Capital Management with a $32.7 million position. Other investors bullish on the company included AQR Capital Management, Winton Capital Management, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Perella Weinberg Partners allocated the biggest weight to Ventas, Inc. (NYSE:VTR), around 0.29% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.24 percent of its 13F equity portfolio to VTR.
Due to the fact that Ventas, Inc. (NYSE:VTR) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of money managers who sold off their positions entirely last quarter. Intriguingly, Eduardo Abush's Waterfront Capital Partners dumped the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $19.5 million in stock. Israel Englander's fund, Millennium Management, also said goodbye to its stock, about $7.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Ventas, Inc. (NYSE:VTR). We will take a look at Digital Realty Trust, Inc. (NYSE:DLR), Edison International (NYSE:EIX), Dollar Tree, Inc. (NASDAQ:DLTR), and T. Rowe Price Group, Inc. (NASDAQ:TROW). This group of stocks' market caps are similar to VTR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DLR,17,135024,-1 EIX,27,1708824,-6 DLTR,49,1912359,0 TROW,23,209393,-7 Average,29,991400,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $991 million. That figure was $352 million in VTR's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Digital Realty Trust, Inc. (NYSE:DLR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Ventas, Inc. (NYSE:VTR) is even less popular than DLR. Hedge funds dodged a bullet by taking a bearish stance towards VTR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately VTR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VTR investors were disappointed as the stock returned -20.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.