These Hedge Funds Sold Mid America Apartment Communities (MAA) Too Early

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Mid America Apartment Communities Inc (NYSE:MAA), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Mid America Apartment Communities Inc (NYSE:MAA) a buy, sell, or hold? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund bets dropped by 8 in recent months. Our calculations also showed that MAA 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 this former hedge fund manager who is convinced Dow will soar past 40000 in a year or two, 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 encompassing Mid America Apartment Communities Inc (NYSE:MAA).

What have hedge funds been doing with Mid America Apartment Communities Inc (NYSE:MAA)?

At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in MAA a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Mid America Apartment Communities Inc (NYSE:MAA), which was worth $117.3 million at the end of the second quarter. On the second spot was Diamond Hill Capital which amassed $74 million worth of shares. Moreover, Fisher Asset Management, Millennium Management, and Adage Capital Management were also bullish on Mid America Apartment Communities Inc (NYSE:MAA), allocating a large percentage of their portfolios to this stock.

Because Mid America Apartment Communities Inc (NYSE:MAA) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few fund managers that elected to cut their full holdings in the second quarter. At the top of the heap, Matthew Tewksbury's Stevens Capital Management sold off the largest position of all the hedgies watched by Insider Monkey, totaling about $6.8 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $5.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds in the second quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Mid America Apartment Communities Inc (NYSE:MAA) but similarly valued. These stocks are Extra Space Storage, Inc. (NYSE:EXR), Symantec Corporation (NASDAQ:SYMC), Paycom Software Inc (NYSE:PAYC), and DENTSPLY SIRONA Inc. (NASDAQ:XRAY). This group of stocks' market values match MAA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXR,20,184908,3 SYMC,35,1342024,6 PAYC,24,397330,-1 XRAY,29,2222723,-2 Average,27,1036746,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1037 million. That figure was $293 million in MAA's case. Symantec Corporation (NASDAQ:SYMC) is the most popular stock in this table. On the other hand Extra Space Storage, Inc. (NYSE:EXR) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Mid America Apartment Communities Inc (NYSE:MAA) is even less popular than EXR. Hedge funds clearly dropped the ball on MAA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on MAA as the stock returned 11.3% during the third quarter and outperformed the market by an even larger margin.

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

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