We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Cousins Properties Incorporated (NYSE:CUZ) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Cousins Properties Incorporated (NYSE:CUZ) investors should be aware of a decrease in enthusiasm from smart money in recent months. Our calculations also showed that CUZ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the latest hedge fund action encompassing Cousins Properties Incorporated (NYSE:CUZ).
Hedge fund activity in Cousins Properties Incorporated (NYSE:CUZ)
At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in CUZ 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.
More specifically, Zimmer Partners was the largest shareholder of Cousins Properties Incorporated (NYSE:CUZ), with a stake worth $75.2 million reported as of the end of September. Trailing Zimmer Partners was Millennium Management, which amassed a stake valued at $53 million. AWH Capital, Prospector Partners, and Driehaus Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Cousins Properties Incorporated (NYSE:CUZ), around 8.94% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, designating 1.04 percent of its 13F equity portfolio to CUZ.
Because Cousins Properties Incorporated (NYSE:CUZ) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of hedge funds who sold off their full holdings in the third quarter. Interestingly, Noam Gottesman’s GLG Partners dumped the biggest stake of the 750 funds followed by Insider Monkey, comprising about $11.3 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also said goodbye to its stock, about $1.7 million worth. These moves are important to note, as aggregate hedge fund interest fell by 7 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Cousins Properties Incorporated (NYSE:CUZ). These stocks are Performance Food Group Company (NYSE:PFGC), Unum Group (NYSE:UNM), Curtiss-Wright Corp. (NYSE:CW), and Nutanix, Inc. (NASDAQ:NTNX). All of these stocks’ market caps resemble CUZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFGC | 31 | 481738 | 5 |
| UNM | 30 | 453012 | 5 |
| CW | 22 | 405133 | -1 |
| NTNX | 32 | 855350 | 6 |
| Average | 28.75 | 548808 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $151 million in CUZ’s case. Nutanix, Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand Curtiss-Wright Corp. (NYSE:CW) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Cousins Properties Incorporated (NYSE:CUZ) is even less popular than CW. Hedge funds dodged a bullet by taking a bearish stance towards CUZ. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately CUZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CUZ investors were disappointed as the stock returned -35.5% 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
