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. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2019. What do these smart investors think about Taylor Morrison Home Corp (NYSE:TMHC)?
Taylor Morrison Home Corp (NYSE:TMHC) investors should be aware of an increase in hedge fund interest recently. TMHC was in 28 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 27 hedge funds in our database with TMHC positions at the end of the previous quarter. Our calculations also showed that TMHC 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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.
Jeffrey Altman of Owl Creek Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind let's take a gander at the fresh hedge fund action encompassing Taylor Morrison Home Corp (NYSE:TMHC).
How are hedge funds trading Taylor Morrison Home Corp (NYSE:TMHC)?
At Q4's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TMHC over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Balyasny Asset Management was the largest shareholder of Taylor Morrison Home Corp (NYSE:TMHC), with a stake worth $68.5 million reported as of the end of September. Trailing Balyasny Asset Management was Echo Street Capital Management, which amassed a stake valued at $57.3 million. Renaissance Technologies, GLG Partners, and Millennium Management 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 Basswood Capital allocated the biggest weight to Taylor Morrison Home Corp (NYSE:TMHC), around 1.95% of its 13F portfolio. Owl Creek Asset Management is also relatively very bullish on the stock, dishing out 1.69 percent of its 13F equity portfolio to TMHC.
Consequently, key money managers were breaking ground themselves. Owl Creek Asset Management, managed by Jeffrey Altman, initiated the biggest position in Taylor Morrison Home Corp (NYSE:TMHC). Owl Creek Asset Management had $32 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $2.3 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, John Overdeck and David Siegel's Two Sigma Advisors, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Taylor Morrison Home Corp (NYSE:TMHC) but similarly valued. We will take a look at Nelnet, Inc. (NYSE:NNI), Zogenix, Inc. (NASDAQ:ZGNX), Progyny, Inc. (NASDAQ:PGNY), and Stepan Company (NYSE:SCL). This group of stocks' market valuations resemble TMHC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NNI,14,100877,2 ZGNX,33,928215,-1 PGNY,8,20023,8 SCL,13,71721,-2 Average,17,280209,1.75 [/table]
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $458 million in TMHC's case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Progyny, Inc. (NASDAQ:PGNY) is the least popular one with only 8 bullish hedge fund positions. Taylor Morrison Home Corp (NYSE:TMHC) 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. Our calculations showed that top 20 most popular stocks among hedge funds 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 beat the market by 5.5 percentage points. Unfortunately TMHC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TMHC were disappointed as the stock returned -44.9% 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 many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
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.
