Were Hedge Funds Right About Flocking Into Arbor Realty Trust, Inc. (ABR) ?

Nina Todic

Fri, May 3, 2019, 6:25 PM

The government requires hedge funds and wealthy investors that crossed the $100 million equity holdings threshold are required to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31. We at Insider Monkey have made an extensive database of nearly 750 of those elite funds and prominent investors' filings. In this article, we analyze how these elite funds and prominent investors traded Arbor Realty Trust, Inc. (NYSE:ABR) based on those filings.

Arbor Realty Trust, Inc. (NYSE:ABR) was in 15 hedge funds' portfolios at the end of the fourth quarter of 2018. ABR shareholders have witnessed an increase in hedge fund interest recently. There were 10 hedge funds in our database with ABR holdings at the end of the previous quarter. Our calculations also showed that abr isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Let's analyze the key hedge fund action surrounding Arbor Realty Trust, Inc. (NYSE:ABR).

How have hedgies been trading Arbor Realty Trust, Inc. (NYSE:ABR)?

At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ABR 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.

Among these funds, Citadel Investment Group held the most valuable stake in Arbor Realty Trust, Inc. (NYSE:ABR), which was worth $5.2 million at the end of the fourth quarter. On the second spot was Navellier & Associates which amassed $4.1 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and Marshall Wace LLP were also bullish on Arbor Realty Trust, Inc. (NYSE:ABR), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, specific money managers were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Arbor Realty Trust, Inc. (NYSE:ABR). Marshall Wace LLP had $1.6 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $0.9 million investment in the stock during the quarter. The other funds with brand new ABR positions are D. E. Shaw's D E Shaw, Dmitry Balyasny's Balyasny Asset Management, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..

Let's now review hedge fund activity in other stocks similar to Arbor Realty Trust, Inc. (NYSE:ABR). We will take a look at Rent-A-Center Inc (NASDAQ:RCII), Enterprise Financial Services Corp (NASDAQ:EFSC), Social Capital Hedosophia Holdings Corp. (NYSE:IPOA), and PJT Partners Inc (NYSE:PJT). This group of stocks' market caps resemble ABR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RCII,19,249791,2 EFSC,15,53093,2 IPOA,21,288648,-2 PJT,18,141813,1 Average,18.25,183336,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $21 million in ABR's case. Social Capital Hedosophia Holdings Corp. (NYSE:IPOA) is the most popular stock in this table. On the other hand Enterprise Financial Services Corp (NASDAQ:EFSC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Arbor Realty Trust, Inc. (NYSE:ABR) is even less popular than EFSC. Hedge funds clearly dropped the ball on ABR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ABR as the stock returned 37.9% and outperformed the market by an even larger margin.

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

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