A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 4 percentage points during the first half of the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Taubman Centers, Inc. (NYSE:TCO) during the quarter.
Is Taubman Centers, Inc. (NYSE:TCO) ready to rally soon? The smart money is getting less bullish. The number of long hedge fund positions fell by 1 recently. Our calculations also showed that TCO isn’t among the 30 most popular stocks among hedge funds.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a look at the key hedge fund action surrounding Taubman Centers, Inc. (NYSE:TCO).
Hedge fund activity in Taubman Centers, Inc. (NYSE:TCO)
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in TCO heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Land & Buildings Investment Management held the most valuable stake in Taubman Centers, Inc. (NYSE:TCO), which was worth $66.7 million at the end of the third quarter. On the second spot was AEW Capital Management which amassed $45 million worth of shares. Moreover, Castle Hook Partners, Long Pond Capital, and Renaissance Technologies were also bullish on Taubman Centers, Inc. (NYSE:TCO), allocating a large percentage of their portfolios to this stock.
Because Taubman Centers, Inc. (NYSE:TCO) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few funds who were dropping their positions entirely by the end of the third quarter. It’s worth mentioning that Brian Gustavson and Andrew Haley’s 1060 Capital Management cut the largest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $12.5 million in stock. Jeffrey Talpins’s fund, Element Capital Management, also dumped its stock, about $11.7 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Taubman Centers, Inc. (NYSE:TCO). We will take a look at Barnes Group Inc. (NYSE:B), Clearway Energy, Inc. (NYSE:CWEN), Glacier Bancorp, Inc. (NASDAQ:GBCI), and BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). This group of stocks’ market caps are closest to TCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| B | 13 | 39069 | 1 |
| CWEN | 16 | 104722 | 0 |
| GBCI | 7 | 54634 | 1 |
| BJ | 32 | 413387 | 10 |
| Average | 17 | 152953 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $253 million in TCO’s case. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is the most popular stock in this table. On the other hand Glacier Bancorp, Inc. (NASDAQ:GBCI) is the least popular one with only 7 bullish hedge fund positions. Taubman Centers, Inc. (NYSE:TCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BJ might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
