The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Douglas Emmett, Inc. (NYSE:DEI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Douglas Emmett, Inc. (NYSE:DEI) investors should be aware of an increase in activity from the world's largest hedge funds lately. Douglas Emmett, Inc. (NYSE:DEI) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistics is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 22 hedge funds in our database with DEI positions at the end of the first quarter. Our calculations also showed that DEI isn't among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Daniel Sundheim D1 Capital
Daniel Sundheim of D1 Capital Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind we're going to go over the latest hedge fund action surrounding Douglas Emmett, Inc. (NYSE:DEI).
How are hedge funds trading Douglas Emmett, Inc. (NYSE:DEI)?
Heading into the third quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DEI over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Douglas Emmett, Inc. (NYSE:DEI) was held by Zimmer Partners, which reported holding $197.3 million worth of stock at the end of September. It was followed by D1 Capital Partners with a $155.2 million position. Other investors bullish on the company included Renaissance Technologies, Long Pond Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to Douglas Emmett, Inc. (NYSE:DEI), around 3.18% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, designating 2.83 percent of its 13F equity portfolio to DEI.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. D1 Capital Partners, managed by Daniel Sundheim, assembled the most valuable position in Douglas Emmett, Inc. (NYSE:DEI). D1 Capital Partners had $155.2 million invested in the company at the end of the quarter. John Khoury's Long Pond Capital also initiated a $80.7 million position during the quarter. The following funds were also among the new DEI investors: Eduardo Abush's Waterfront Capital Partners, Donald Sussman's Paloma Partners, and Renee Yao's Neo Ivy Capital.
Let's now review hedge fund activity in other stocks similar to Douglas Emmett, Inc. (NYSE:DEI). These stocks are Dunkin Brands Group Inc (NASDAQ:DNKN), First American Financial Corp (NYSE:FAF), Jones Lang LaSalle Inc (NYSE:JLL), Woori Financial Group Inc. (NYSE:WF), Corelogic Inc (NYSE:CLGX), Columbia Sportswear Company (NASDAQ:COLM), and United Therapeutics Corporation (NASDAQ:UTHR). This group of stocks' market values are similar to DEI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DNKN,35,416764,1 FAF,44,685903,4 JLL,23,676141,-3 WF,5,3508,2 CLGX,35,887468,4 COLM,17,36331,2 UTHR,41,1344322,10 Average,28.6,578634,2.9 [/table]
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $699 million in DEI's case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 5 bullish hedge fund positions. Douglas Emmett, Inc. (NYSE:DEI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DEI is 68.2. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately DEI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DEI investors were disappointed as the stock returned -19.8% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
