Is Industrial Logistics Properties Trust (ILPT) A Good Stock To Buy?

Reymerlyn Martin

Sun, Jun 23, 2019, 7:44 PM

"The end to the U.S. Government shutdown, reports of progress on China-U.S. trade talks, and the Federal Reserve’s confirmation that it did not plan further interest rate hikes in 2019 allayed investor fears and drove U.S. markets substantially higher in the first quarter of the year. Global markets followed suit pretty much across the board delivering what some market participants described as a “V-shaped” recovery," This is how Evermore Global Value summarized the first quarter in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

Industrial Logistics Properties Trust (NASDAQ:ILPT) shareholders have witnessed a decrease in support from the world's most elite money managers lately. ILPT was in 16 hedge funds' portfolios at the end of the first quarter of 2019. There were 19 hedge funds in our database with ILPT holdings at the end of the previous quarter. Our calculations also showed that ILPT isn't among the 30 most popular stocks among hedge funds.

If you'd ask most stock holders, hedge funds are assumed to be slow, old financial vehicles of years past. While there are greater than 8000 funds in operation at the moment, Our experts look at the aristocrats of this group, approximately 750 funds. Most estimates calculate that this group of people command the lion's share of the hedge fund industry's total capital, and by tailing their top equity investments, Insider Monkey has determined many investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

We're going to take a glance at the latest hedge fund action surrounding Industrial Logistics Properties Trust (NASDAQ:ILPT).

How have hedgies been trading Industrial Logistics Properties Trust (NASDAQ:ILPT)?

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in ILPT a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Industrial Logistics Properties Trust (NASDAQ:ILPT) was held by HBK Investments, which reported holding $43.8 million worth of stock at the end of March. It was followed by Indaba Capital Management with a $38.3 million position. Other investors bullish on the company included Yost Capital Management, Cloverdale Capital Management, and Sabrepoint Capital.

Since Industrial Logistics Properties Trust (NASDAQ:ILPT) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that slashed their full holdings last quarter. Intriguingly, Thomas Steyer's Farallon Capital sold off the largest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $12 million in stock, and Shane Finemore's Manikay Partners was right behind this move, as the fund sold off about $11.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Industrial Logistics Properties Trust (NASDAQ:ILPT). These stocks are Clovis Oncology Inc (NASDAQ:CLVS), Fresh Del Monte Produce Inc (NYSE:FDP), Getty Realty Corp. (NYSE:GTY), and MGP Ingredients Inc (NASDAQ:MGPI). This group of stocks' market caps are closest to ILPT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLVS,29,567447,5 FDP,14,43087,-1 GTY,9,89875,1 MGPI,13,24351,5 Average,16.25,181190,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $181 million in ILPT's case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand Getty Realty Corp. (NYSE:GTY) is the least popular one with only 9 bullish hedge fund positions. Industrial Logistics Properties Trust (NASDAQ:ILPT) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ILPT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ILPT investors were disappointed as the stock returned 2.4% 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 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content