Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Teekay Corporation (NYSE:TK).
Is Teekay Corporation (NYSE:TK) the right pick for your portfolio? Money managers are categorically taking a bearish view. The number of long hedge fund investments contracted by 3 lately. TK was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. There were 15 hedge funds in our database with TK positions at the end of the previous quarter. At the end of this article we will also compare TK to other stocks including EarthLink, Inc. (NASDAQ:ELNK), Western Asst High Incm Opprtnty Fnd Inc. (NYSE:HIO), and Community Trust Bancorp, Inc. (NASDAQ:CTBI) to get a better sense of its popularity.
Follow Teekay Corp (NYSE:TK)
Follow Teekay Corp (NYSE:TK)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What have hedge funds been doing with Teekay Corporation (NYSE:TK)?
Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TK over the last 5 quarters, which has largely been negative. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, RIMA Senvest Management, led by Richard Mashaal, holds the number one position in Teekay Corporation (NYSE:TK). RIMA Senvest Management has a $21.5 million position in the stock, comprising 1.5% of its 13F portfolio. Sitting at the No. 2 spot is Magnetar Capital, led by Alec Litowitz and Ross Laser, holding a $21 million position. Other professional money managers that hold long positions contain Cliff Asness’ AQR Capital Management, Renaissance Technologies, one of the largest hedge funds in the world, and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. It’s worth mentioning that Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $4.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $4 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to Teekay Corporation (NYSE:TK). We will take a look at EarthLink, Inc. (NASDAQ:ELNK), Western Asst High Incm Opprtnty Fnd Inc. (NYSE:HIO), Community Trust Bancorp, Inc. (NASDAQ:CTBI), and National Interstate Corporation (NASDAQ:NATL). This group of stocks’ market caps are closest to TK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ELNK | 20 | 97904 | -2 |
| HIO | 4 | 7992 | -1 |
| CTBI | 4 | 8773 | -1 |
| NATL | 5 | 24635 | -1 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $70 million in TK’s case. EarthLink, Inc. (NASDAQ:ELNK) is the most popular stock in this table. On the other hand Western Asst High Incm Opprtnty Fnd Inc. (NYSE:HIO) is the least popular one with only 4 bullish hedge fund positions. Teekay Corporation (NYSE:TK) 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 ELNK might be a better candidate to consider taking a long position in.
Disclosure: None
