It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. 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 Cousins Properties Incorporated (NYSE:CUZ).
Cousins Properties Incorporated (NYSE:CUZ) investors should pay attention to an increase in hedge fund interest in recent months. CUZ was in 14 hedge funds’ portfolios at the end of the third quarter of 2018. There were 13 hedge funds in our database with CUZ holdings at the end of the previous quarter. Our calculations also showed that cuz isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s view the latest hedge fund action encompassing Cousins Properties Incorporated (NYSE:CUZ).
How have hedgies been trading Cousins Properties Incorporated (NYSE:CUZ)?
Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in CUZ over the last 13 quarters. 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, Balyasny Asset Management held the most valuable stake in Cousins Properties Incorporated (NYSE:CUZ), which was worth $14.1 million at the end of the third quarter. On the second spot was Waterfront Capital Partners which amassed $10 million worth of shares. Moreover, Renaissance Technologies, Millennium Management, and Prospector Partners were also bullish on Cousins Properties Incorporated (NYSE:CUZ), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Waterfront Capital Partners, managed by Eduardo Abush, initiated the largest position in Cousins Properties Incorporated (NYSE:CUZ). Waterfront Capital Partners had $10 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $1 million investment in the stock during the quarter. The following funds were also among the new CUZ investors: Benjamin A. Smith’s Laurion Capital Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cousins Properties Incorporated (NYSE:CUZ) but similarly valued. We will take a look at Intercept Pharmaceuticals Inc (NASDAQ:ICPT), Selective Insurance Group, Inc. (NASDAQ:SIGI), AutoNation, Inc. (NYSE:AN), and BankUnited (NYSE:BKU). This group of stocks’ market values match CUZ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICPT | 19 | 152721 | 1 |
| SIGI | 10 | 36011 | 0 |
| AN | 24 | 430091 | 1 |
| BKU | 27 | 570820 | 5 |
| Average | 20 | 297411 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $48 million in CUZ’s case. BankUnited (NYSE:BKU) is the most popular stock in this table. On the other hand Selective Insurance Group, Inc. (NASDAQ:SIGI) is the least popular one with only 10 bullish hedge fund positions. Cousins Properties Incorporated (NYSE:CUZ) 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. In this regard BKU might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
