Is Teekay Corporation (TK) A Good Stock To Buy?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Teekay Corporation (NYSE:TK).

Is TK a good stock to buy? Teekay Corporation (NYSE:TK) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. Teekay Corporation (NYSE:TK) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 19. Our calculations also showed that TK isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 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 S&P 500 ETFs by 79 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 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.

Michael Platt of BlueCrest Capital Mgmt.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a look at the fresh hedge fund action regarding Teekay Corporation (NYSE:TK).

Do Hedge Funds Think TK Is A Good Stock To Buy Now?

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in TK a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

More specifically, Cobalt Capital Management was the largest shareholder of Teekay Corporation (NYSE:TK), with a stake worth $15 million reported as of the end of June. Trailing Cobalt Capital Management was Renaissance Technologies, which amassed a stake valued at $8.5 million. D E Shaw, Arrowstreet Capital, 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 Cobalt Capital Management allocated the biggest weight to Teekay Corporation (NYSE:TK), around 5.25% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to TK.

Because Teekay Corporation (NYSE:TK) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their positions entirely in the second quarter. Interestingly, Israel Englander’s Millennium Management cut the largest stake of the 750 funds tracked by Insider Monkey, totaling close to $2.5 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Teekay Corporation (NYSE:TK) but similarly valued. We will take a look at Alexco Resource Corp. (NYSE:AXU), Target Hospitality Corp. (NASDAQ:TH), 89bio, Inc. (NASDAQ:ETNB), Primis Financial Corp. (NASDAQ:FRST), Identiv, Inc. (NASDAQ:INVE), Superior Group of Companies, Inc. (NASDAQ:SGC), and Farmland Partners Inc (NYSE:FPI). This group of stocks’ market valuations are similar to TK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $28 million in TK’s case. Target Hospitality Corp. (NASDAQ:TH) is the most popular stock in this table. On the other hand Alexco Resource Corp. (NYSE:AXU) is the least popular one with only 3 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. Our overall hedge fund sentiment score for TK is 49.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately TK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TK were disappointed as the stock returned 0.3% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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