We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Taylor Morrison Home Corporation (NYSE:TMHC).
Taylor Morrison Home Corporation (NYSE:TMHC) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that TMHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a lot of metrics stock traders can use to appraise stocks. A couple of the most innovative metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the broader indices by a significant amount (see the details here).
Ken Heebner of Capital Growth Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the new hedge fund action regarding Taylor Morrison Home Corporation (NYSE:TMHC).
What have hedge funds been doing with Taylor Morrison Home Corporation (NYSE:TMHC)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TMHC over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Echo Street Capital Management was the largest shareholder of Taylor Morrison Home Corporation (NYSE:TMHC), with a stake worth $51.9 million reported as of the end of September. Trailing Echo Street Capital Management was Capital Growth Management, which amassed a stake valued at $51.5 million. Polar Capital, Marshall Wace, and Citadel Investment Group 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 Capital Growth Management allocated the biggest weight to Taylor Morrison Home Corporation (NYSE:TMHC), around 3.94% of its portfolio. SG Capital Management is also relatively very bullish on the stock, designating 2.53 percent of its 13F equity portfolio to TMHC.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Capital Growth Management, managed by Ken Heebner, created the biggest position in Taylor Morrison Home Corporation (NYSE:TMHC). Capital Growth Management had $51.5 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $13.7 million position during the quarter. The following funds were also among the new TMHC investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renee Yao’s Neo Ivy Capital, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Taylor Morrison Home Corporation (NYSE:TMHC) but similarly valued. These stocks are Transocean Ltd (NYSE:RIG), SINA Corporation (NASDAQ:SINA), CONMED Corporation (NASDAQ:CNMD), and Herman Miller, Inc. (NASDAQ:MLHR). This group of stocks’ market values resemble TMHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RIG | 36 | 256394 | 5 |
| SINA | 19 | 256685 | 0 |
| CNMD | 22 | 201980 | 3 |
| MLHR | 26 | 209936 | 1 |
| Average | 25.75 | 231249 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $375 million in TMHC’s case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand SINA Corporation (NASDAQ:SINA) is the least popular one with only 19 bullish hedge fund positions. Taylor Morrison Home Corporation (NYSE:TMHC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TMHC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TMHC investors were disappointed as the stock returned -10.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
